JAPAN Law and Practice Contributed by: Eriko Ozawa, Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
Registration of a Title Transfer A transfer must be registered pursuant to the real estate registration system in order for it to be perfected. If a transfer of real property is not reg - istered, the buyer cannot assert its title against a third party. Applications for registration of title transfer can be completed online, but the use of registered seals to execute the documents required for reg - istration is still the prevalent practice. In Japan, the pandemic caused no major delays or other disruptions in real estate registration procedures. Title Insurance Title insurance is not commonly used in the Jap - anese real estate market. 2.4 Real Estate Due Diligence A real estate due diligence process usually involves some or all of the following elements. • Document review – documents to be reviewed include publicly available materi - als such as a certified copy of the real estate registration, as well as the contracts that have been entered into in respect of the subject property. An “explanation sheet of important matters” ( juyo jiko setsumei sho ) prepared by a broker or the seller is usually one of the major documents that should be reviewed, as it is supposed to provide an orderly over - view of the property (including pre-closing or post-closing requirements under public laws applicable to the transfer of the property) and highlight issues relating to the property. • On-site inspection – the buyer often retains, and brings to on-site inspections, an apprais - er and a property inspector, who will prepare the necessary third-party reports. • Question-and-answer sessions – these are conducted in writing, through email, tel -
ephone or online meeting software, or at face-to-face meetings. • Third-party reports – for commercial real estate, the buyer often arranges for profes - sional service providers to prepare a real estate appraisal report and an engineering report. 2.5 Typical Representations and Warranties Under the Civil Code, the seller is liable for any defect in the subject property. This defect liabil - ity may be limited by agreement on the scope, duration or amount of liability. This defect liability is referred to as “non-conformity liability” in the Reformed Civil Code. Aside from such statu - tory liability, the seller and the buyer often agree on contractual representations and warranties regarding the subject property. The scope and duration of the seller’s property representa - tions and warranties vary from deal to deal. It is not necessarily common in Japan for repre - sentations and warranties in purchase and sale agreements to address issues relating to the COVID-19 pandemic. The primary remedies for statutory liability and seller’s misrepresentations are termination of the purchase agreement and compensation for damages (or indemnity). It is not common in Japan for the parties to use representation and warranty insurance for real estate transactions. 2.6 Important Areas of Law for Investors The primary laws relating to real estate transac - tions include the following: • the laws governing private parties’ rights and obligations are the Civil Code, the Law on Unit Ownership of Buildings, the Land Lease and Building Lease Law, and the Real Estate Registration Law;
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