JAPAN Law and Practice Contributed by: Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
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 liabil - ity is referred to as “non-conformity liability” in the Reformed Civil Code. Aside from this 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 representations and warranties vary from deal to deal. 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 for the parties to use representation and warranty insurance for real estate transactions in Japan. 2.6 Important Areas of Law for Investors The primary laws relating to real estate transac - tions include the:
• laws governing private parties’ rights and obligations (the Civil Code, the Law on Unit Ownership of Buildings, the Land Lease and Building Lease Law and the Real Estate Reg - istration Law); • laws regarding regulations and public policy (the City Planning Law, the Construction Standards Law, the Soil Contamination Coun- termeasures Law, the Real Estate Transaction Business Law and local government ordi - nances); • laws related to trusts and TBI transactions (the Trust Law, the Trust Business Law and the Financial Instruments and Exchange Law); and • laws related to foreign investment (the For - eign Exchange and Foreign Trade Law). 2.7 Soil Pollution or Environmental Contamination The buyer may be responsible for soil pollution or the environmental contamination of a prop - erty. If the soil contamination is likely to harm human health, the land will be designated as an area requiring action ( yo sochi kuiki ) under the Soil Contamination Countermeasures Law and the landowner is required to take the necessary measures to remedy the contamination. These measures depend on the class of hazardous substances found on the land and on the state and degree of contamination. In practice, the removal of contaminated soil is the prevailing remedial method. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law The City Planning Law is the main source of zon - ing regulations. An “explanation sheet of impor - tant matters” prepared by a broker or the seller will address the zoning restrictions applicable to the subject property under the City Planning Law. A buyer may also consult with relevant
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