JAPAN Law and Practice Contributed by: Eriko Ozawa, Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
tors are not deemed to be in breach of their fidu - ciary duty and duty of care. 3.6 Formalities When a Borrower Is in Default In the case of a borrower’s default, a mortgagee would typically accelerate the entire outstand - ing debt pursuant to the credit agreement. After the secured obligation becomes due, the mort - gagee may judicially enforce the mortgage by submitting the real estate registration certificate on which the mortgage is registered. The prior - ity of the mortgage vis-à-vis other mortgages is determined based on the order of mortgage registration. There have been no specific gov - ernmental measures taken in response to the COVID-19 pandemic to restrict a lender’s abil - ity to foreclose or realise collateral in real estate lending. 3.7 Subordinating Existing Debt to Newly Created Debt Unless the existing lenders with perfected secu - rity interest agree, they do not become subordi - nated to any newly created non-preferred debt. 3.8 Lenders’ Liability Under Environmental Laws Because a financer such as a lender is not an “owner” for purposes of the Soil Contamination Countermeasures Law, a lender is not respon - sible for soil contamination investigations and countermeasures, unless it acquires the land from the borrower in default through the enforce - ment of a security. According to a notice issued by the Ministry of Environment, even if the borrower assigns its land to a lender for the purpose of security ( joto-tampo ), the borrower but not the lender is deemed to be the “owner” of the land and will be responsible for any investigations and counter -
measures under the Soil Contamination Coun - termeasures Law. 3.9 Effects of a Borrower Becoming Insolvent The creation of a security interest by a financially distressed borrower may be invalidated (by the insolvency trustee or the debtor-in-possession under the theory of bankruptcy avoidance) if the security interest was created to secure existing debt after the filing of an insolvency petition with respect to the borrower. The perfection of a security interest may also be avoided even where the creation of a secu - rity interest itself may not be avoided, pursuant to the criteria set out above. The requirements of such avoidance include the perfection being made after the suspension of payments or the filing of an insolvency petition, and not being made within 15 days of the creation of the secu - rity interest. 3.10 Taxes on Loans In Japan, there are no recording or similar taxes in connection with mortgage loans or mezzanine loans related to real estate. Regarding the reg - istration and licence tax required for registration of a mortgage, please see 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security . 4. Planning and Zoning 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning The City Planning Law is the main source of planning and zoning regulations. Local ordi - nances are also relevant.
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