JAPAN Law and Practice Contributed by: Satoru Hasumoto, Takahiro Sato and Fuyuki Uchitsu, Mori Hamada & Matsumoto
6.8 Costs Payable by a Tenant at the Start of a Lease Typical costs payable by a tenant at the start of a lease include a deposit (often calculated by a multiple of the monthly rent, depending on the type of lease and the real estate), brokerage fees, insurance premiums and other expenses, such as for replacement of the keys. In addi - tion, it is market practice for the tenant to pay a renewal fee (a multiple of the monthly rent) for each renewal of the lease term. 6.9 Payment of Maintenance and Repair The maintenance and repair costs of common areas are paid by the building owner, primarily from the money paid by tenants as common area fees. 6.10 Payment of Utilities and Telecommunications Utilities and telecommunications serving a prop - erty occupied by several tenants are paid for by the building owner, primarily from the money paid by tenants as common area fees. 6.11 Payment of Property Taxes The real estate taxes relating to rental property are the fixed asset tax ( kotei shisan zei ) and the city planning tax ( toshi keikaku zei ), which are imposed on and paid by the owners of the real estate under Japanese law. However, in practice, we have seen parties making separate arrange - ments for these taxes. For example, in the case of a triple net lease, the tenant, rather than the building owner, usually bears the property taxes indirectly. 6.12 Insurance Issues A tenant typically pays for insurance covering damage caused by accidents occurring in the real estate and by fire and, in some cases, earth - quake and flood. Conventional business inter -
Aside from a contractual rent review, the Land Lease and Building Lease Law entitles either party to a lease to demand that the rent be increased or decreased in response to market conditions. If the parties cannot come to an agreement, a court may order an adjustment after considering the following: • any change in tax or other liabilities imposed on the leased real estate (or the underlying land in the case of a building lease); • the value of the leased real estate (or the underlying land in the case of a building lease) and other relevant economic condi - tions; and • rents in neighbouring areas. If the lessor and tenant specifically agree not to increase the rent for a certain period, the lessor cannot exercise its right to demand an increase in the rent but, with respect to a land lease and a general building lease, the tenant cannot be deprived of the right to demand a decrease in the rent, even if it has explicitly agreed not to exercise that right under the lease. However, a different rule applies to a fixed term building lease, under which the lessor and the tenant may exclude the application of the rule on rent adjustment by setting out express provi - sions on rent revisions. 6.6 Determination of New Rent Please see 6.5 Rent Variation . 6.7 Payment of VAT Consumption tax (which is equivalent to VAT) is payable on the rent on building leases other than for residential purposes. The rent on land leases is exempted from consumption tax.
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