JAPAN Law and Practice Contributed by: Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
3.5 Legal Requirements Before an Entity Can Give Valid Security If there are minority shareholders in a company that is providing security to secure a debt owed by its parent company, the directors of the secu - rity provider usually obtain the consent of the minority shareholders to ensure that the direc - 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 pan - demics to restrict a lender’s ability 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 Due to the fact that a financer such as a lender is not an “owner” for the purposes of the Soil Contamination Countermeasures Law, a lender is not responsible for soil contamination investi - gations and countermeasures, unless it acquires the land from the borrower in default through the enforcement of a security.
intend to enter into financing transactions on a continual basis, a revolving mortgage may be created instead. If the borrower holds an inter - est in real estate in the form of a TBI, a pledge over the TBI is the principal security interest in place of a mortgage. Some lenders may require pledges over insurance claims. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no special restrictions on granting security over real estate to foreign lenders. How - ever, a licensing requirement applies if a foreign financial institution lends money in Japan as part of its money lending business, unless the institu - tion is a licensed bank in its home country and has a Japanese branch. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Formal (ie, non-provisional) registration of a mortgage is subject to a registration and licence tax at a rate of 0.4% of the secured amount. Due to the fact that this tax can be substan - tial depending on the secured obligation, some lenders permit the borrower to only make a pro - visional registration, which costs JPY1,000 for each real property. Once the mortgage is for - mally registered based on the provisional regis - tration, the mortgagee enjoys priority over other mortgagees who register their mortgages after the provisional registration. Judicial foreclosure of a mortgage involves vari - ous costs. The applicant has to prepay up to JPY2 million (in the case of the Tokyo District Court) to a competent court, which will be cred - ited to the court’s expenses.
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