JAPAN Law and Practice Contributed by: Eriko Ozawa, Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
6.18 Right to Assign a Leasehold Interest
treats such unpaid rents as preferential claims. Furthermore, if the lease is continued, the rents that are due on or after the commencement of the relevant insolvency procedure are paid from the insolvency estate in preference to other gen - eral insolvency claims. In practice, lease agreements often provide for the lessor’s right to terminate the lease upon the commencement of an insolvency procedure on the part of the tenant. However, there are a few legal precedents that reject such a contractual provision, so the validity thereof remains argu - able. 6.16 Forms of Security to Protect Against a Failure of the Tenant to Meet Its Obligations Typically, a tenant is required to pay a deposit at the start of the lease as security for any failure to pay in the future. A typical lease agreement contains a provision that allows the landlord to utilise the deposit to cover any outstanding obli - gation of the tenant. 6.17 Right to Occupy After Termination or Expiry of a Lease A tenant is obliged to vacate and return the leased property on or before the expiration or termination of the lease term if the lease is not renewed. Generally, the lessor does not have to do any- thing to ensure that the tenant vacates the prop - erty on time, as long as the lease duly expires or terminates. However, there is a special require - ment in a Fixed-Term Building Lease that the lessor must provide written notice of the expiry of the lease term from one year to six months prior to the expiry date in order to oblige the tenant to vacate the leased property by the end of the lease term.
A tenant may assign its leasehold interest in the lease or sublease all or a portion of the leased premises if it is able to obtain the owner’s approval. 6.19 Right to Terminate a Lease Typically, lease agreements provide that the fol - lowing events give the landlord a right to termi - nate the lease: • a breach of obligation by the tenant, such as failure to pay rent; • the commencement of an insolvency proce - dure by the tenant; • the occurrence of events that constitute grounds for the commencement of an insol - vency procedure, such as being “unable to pay” (ie, unable to pay debts generally when they fall due); and • the issuance of an order for compulsory exe - cution, petition for auction sale or compulsory disposition for delinquent public charges. Having said this, the court takes the view that the lessor is entitled to terminate the lease only if the tenant’s breach amounts to a destruction of the relationship of trust between the lessor and the tenant, regardless of any provision in the lease agreement. A statutory right to terminate in the case of the tenant’s insolvency is discussed in 6.15 Effect of the Tenant’s Insolvency . 6.20 Registration Requirements A Fixed-Term Land Lease and a Fixed-Term Building Lease must be made in writing (see 6.2 Types of Commercial Leases ).
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