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Editor’s Note: Zoe Ward is the publisher of Japan Property Central and has extensive experience in the Tokyo real estate market, working for some of the advertising agents on Real Estate Japan.
Good news for tenants and bad news for landlords in Japan: A change in the traditional transaction customs in the residential and commercial rental market in Japan is underway which is putting more power on the tenants’ side.
The various fees usually paid by a tenant such as security deposits ("shikikin") and key money ("reikin") are decreasing. Japan’s declining birth rates, decreasing population, oversupply of housing and the growing awareness of consumer rights have put an end to the era where landlords once held all of the power.
30% of apartments do not require key money, 50% only require 1 month deposit
According to real estate information service and property listing database, AtHome, 28% of apartments listed for rent in Tokyo’s 23 Wards in 2010 did not require any key money. This is 17.8% higher than in 2007.
Apartments that only required 1 month deposit totaled 51.2% in 2010 – up from 29.2% in 2007. Meanwhile, apartments that required 2 month’s deposit fell from 63.2% in 2007 to 40%. Apartments that did not require any deposit increased from 3.1% to 5.1%.
The basis of these payments is opaque. Criticism is growing over the various costs that a tenant must pay when moving into an apartment. The number of lawsuits over these costs is also increasing. In July, the Supreme Court ruled that a rental contract renewal fee was valid, but many people still feel the that there is no rational explanation for the need to charge such fees. Deposits required for commercial space falls to lowest levels
The fees when renting an office space are also falling. According to CB Richard Ellis, office spaces in Tokyo’s 23 wards required an average of 8.6 month’s deposit as of June, 2011. During the most recent peak of September, 2008, the average deposit was 9.4 months. This year is the lowest average since they began record keeping in 1996.
In Osaka, the average in June, 2011, was 10.1 month’s deposit which is down 0.8 months from the peak in March, 2008, and is the lowest recorded average.
CBRE said that there were cases during Japan’s bubble years where a deposit of as high as 24 months was required before renting a commercial space. While 2 or 3 months deposit is the norm in many other countries, Japan’s deposit requirements still seem quite high.
Competition to attract tenants
The main reason for the reduction in deposits is to attract tenants in a highly competitive market. Rather than offering reduced rent, landlords are trying to appeal to potential tenants by reducing the initial upfront costs they would normally have to pay.
For a tenant planning to move into a 10,000 sqm office space, they are looking at initial costs of several hundred million Yen. From the point of view of the tenant, a portion of the company’s funds are essentially ‘locked-up’ and cannot be used while they occupy that space. Furthermore, if the building owner declares bankruptcy, there is a risk that the tenant will not have their deposit refunded.
The new era of the tenant
Both residential and commercial tenants are becoming more critical over the various upfront expenses associated with renting a new space, especially those costs which are hard to define as being essential.
There are various theories over the custom of security deposits and key money. The custom of paying the landlord key money is said to have started just after the 2nd World War when housing was at a shortage. Key money was also frequently required by landlords in Kobe following the 1995 Hanshin earthquake.
The various customs that developed during a time when it was a landlords’ market are in for a review now that Japan’s population is in decline and the power has shifted towards the tenants.
Source: The Nikkei Shimbun
This story originally appeared on Real Estate Japan.
© Japan Today
31 Comments
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Serrano
Oh, if only I could have back all the shikikin and reikin I've paid...
nath
Heh. Ditto...
y3chome
Good at last; and hopefully then the rents will start to come down to sensible levels.
badokun
Exactly for this reason that we ended up renting from UR where none of this rubbish is required.
tmarie
Good to see that this highway robbery is coming to an end!
yagura
Key money (reikin) is just another one of those fees that seem to be everywhere in Japan. I always viewed it as a necessary evil if I really wanted to live in a particular place. I understood that it was essentially a "gift" that I was not going to get back. That didn't make it any easier to pay, but at least I know what it was from the start. Having said that, I'm glad that it seems to becoming less and less common.
I have no problem with the concept of a "security deposit" (shikikin). In my experience they are (were) quite the norm in the U.S. as well. Amount would vary but it would usually be about 2 to 3 months rent. Even in the States many real estate companies/property owners will try and get as much of it as they can if you're not careful. You have to watch how they assess things and make sure they are not charging you for something that they are not legally entitled to do. Had a few landlords try to do this to me while I was a student. One of them literally walked through the apartment with white gloves on looking for dust. Most of the time an agreement that was satisfactory to both sides could be reached after some hammering out. I never had to, but I knew of some people then ended up going to court to get their money back.
The key term to remember in Japan is "原状回復" (Genjou Kaifuku). Basically you are only obligated to return any rented property back to the state it was in when you moved in. This is tricky since what you think and what the management company thinks are often quite different. But, there are specific guidelines available to help you figure out what is what.
Of course, if you put holes in the wall, break any of the fixtures, or cause damage that would not be considered "normal wear and tear", the management company can take the cost of those repairs out of your "security deposit". The problem is that too many companies see the ending of a lease as an opportunity to basically get the former tenant to pay for (some or all) the cost of remodeling the unit for future tenants. They try to get you to pay the cost of everything from normal cleaning (they're supposed to cover that themselves), replacing all of the tatami mats (if even only one is slightly discolored), re-papering all of the walls (because of a pinhole or some discoloration somewhere), etc., etc. Instead of returning the unit to the condition it was when you moved in, the company wants to return it to the condition it was before anybody moved in. Most companies know they are not suppose to do this but they will still try and get away with what they can if you're not careful. The laws are already in place, you just have to be a little proactive and look for them.
Personal experience: The last unit we rented we had lived in for about 5 years. We had paid about 25 man as shikiken. It was a little dirty and there was some minor damage that we knew was our fault but for the most part it was still in pretty good shape. On the day we left, an agent for our management company came by to look at the apartment and sign us out. He walked through the place, holding a calculator-like thing and just started entering stuff that he saw. When he had finished, he told us that all of the cleaning charges, etc. would be about 23 man and he printed us out a list to sign. We looked over the list, pointed out things that we felt were incorrectly added and told him that he was asking for too much. He didn't budge so we told him that we would not sign and were contesting the charges. After moving to our new home, we checked online and found a group that helped people in similar situations. They confirmed what we thought and through their help we were able to get the company to drop the amount they wanted to about 4 man (which we felt was reasonable). Whole process from when we moved out to when we got our money back took about 3 months.
tmarie
I have no problem with the concept of a "security deposit"
I have a problem with the way it is done here. As you pointed out, they try and keep it regardless of how clean the apartment is. Having paid security deposits in two other countries and having always gotten it back, Japanese landlords try it to - knowing full well that most people will suck it and not fight it. I have fought it and gotten more back than originally offered but not nearly the full deposit. Regular wear and tear shouldn't be charged for - but it is. Tatami and wallpaper are supposed to be replaced at the cost of the landlord - not the renter. Thing is, here the will add it in - illegally. The place I live in now is brand now, no key money and one month deposit. There is a two year re-newer fee but we're going to try and get out of it. You shouldn't have to pay to renew. All a money making scam considering the quality of housing and apartments here, let alone the size.
yagura
Once again, I have no problem the concept (=idea) behind a security deposit. However, I will agree with you in that often what happens (not just here in Japan) is often quite different.
Like I posted, lots of companies will try to get away with what they can. Whether you let them or not is another story. If somebody is charging you more than you feel they are entitled to then there are places you can go to for help/advice. Sometimes you have to be a little proactive, find out what your rights are, and then take action accordingly. If you do nothing because it's too much of a hassle then the same thing will keep happening to you over and over again until you do.
Good luck with your renewal fee. Personally, I don't have a problem with them as long as they are reasonable, but we all have to choose when and where we want to make a stand.
Luckily, I don't have to rent anymore. I own my own place free and clear (no loans). All I have to do is pay my taxes, etc. on time which is a completely different story all together :D
ExportExpert
Yeah get out of the renting tread mill as soon as you can, even if you pay a mortage you will be gaining equity in the property and even though property prices are dropping slightly you will still be ahead of the curve, I own now but paid close to 20mill yen in rent over the years here before i took out a mortage, wish i had of done it earlier though.
Rent is just dead money.
sillygirl
back in the states (nyc) we just used the security deposit as the last month`s rent. key money is - and has been for years - illegal in the states.
tmarie
Yagura, I would have fought had we lived in the area. We moved from the area so didn't have a choice. I'm glad more people are putting their foot down but more need to. I have laughed in the faces of agents who have tried to tell me key money and whatnot is over 30 man. More so when I don't live in a big city , the buildings are old... Greedy, greedy landlords and agents. I am glad the jig is looking like it is up. Now if we could only convince the housing market to be "buy and sell" not "buy and die in it".
iceshoecream
I'm moving to a new place tomorrow and I didn't have to pay for shikikin nor reikin. Like zichi said, look around.
Fadamor
Security deposits are reasonable as long as they are really DEPOSITS. If the place is in the same shape as when you moved in (minus normal wear), then you should be getting your full deposit back.
One thing I would do to help protect myself would be to go around with the agent on move-in day and again at move-out day, with your favorite digital camera in hand. On move in day, photograph anything you find in need of repair and make the agent note them on the rental contract. On move-out day photograph everything the agent tries to charge you for, then have them certify that only (x) items were noted. If the charges later have 10 items and your copy says only 8 items were noted, you have some good documentation to support your case. If the charges state the same 8 items, but you are disputing some of them, you have photographs to support your dispute.
DentShop
My god - something we all agree on! Cold sweat! Starting to tremble a little. Has hell frozen over?
If this story is indeed true I will be quite happy. This feudal practice is a hinderance to competition and nothing more than a bribe. Welcome to the 20th century Japan!
Ranger_Miffy2
For my basic 1LDK in Tokyo, I fought tooth and nail against paying an entire month's rent plus a new guarantor and fee to renew the bi-annual lease. Able dropped the guarantor requirement and accepted a renewal of Y40,000. The second time I had to renew, I complained, and they dropped it to Y25,000.
I'm ambivalent about buying vs renting. Renting gives me the freedom to leave, and if an earthquake destroys the place, I do not have to continue paying for the place. Not everyone can be as lucky as some of the posters here (talking especially to you, Zichi-san, you lucky dog!)
I wonder about my security deposit, especially as all the walls in this place are covered with that tacky white textured paper that scratches easily, and floors are that equally tacky plastic foam flooring that never self-heals. The spillage from the shelves in the quakes really dented flooring everywhere. Not my fault! :-0
Thanks for the bundle of great info, Yagura-san, and others.
GW
back in the early 90s renting my first place I paid 2.5-3mths for all the crap, with 2mths potentially refunded IF the place was clean, so I thought naively if I cleaned the place I cud get most back. BUT I did a bit of a test, I left a decent sized dust bunny in the middle of the 1room place & kept a spare key I had made.
We the agent charged me 75-80% of my deposit for cleaning the place, PRI$K$, so I went back, went inside & sure enough the dust bunny was sitting right where I left it!
Since then when I rented I ALWAYS asked for & rec'd discounts on deposits, imo ALWAYS ask! My wife dont me not to but I ignored her & asked & in 15min knocked off 1.5mths of deposits, after that she always let me ask!
Thankfully I no longer rent, but overall about half the agents/landlords were reasonable, the others were quicker than hell to shaft us!
MustardKing
Its always a good thing when silly, completely contrived rules created solely for the profit of the "haves" over the "have nots" goes the way of the dinosaur.
But this is the tip of the iceberg for such things both here and in every country in the world. And never fear, something new and just as unfair and contrived will be crammed down your throat shortly.
yagura
Not sure why you didn't have a choice. We were in a similar situation. We moved completely across the country from Western to Eastern Japan. We contested the charges at our final meeting, moved to our new place and found a group in our new area to help us out. The rest was done via email and letters.
gogogo
I got my office and my house contracts both down per month
Carlos Godoy
Show me. Till I see it, I don't believe.
Carlos Godoy
Believe it.
Ranger_Miffy2
Worked for me.
FightingViking
It was only at the last place we rented that I really got fleeced. Until then, having moved more times than I care to remember, I had NEVER been asked for "reikin" and only paid a maximum of 2 months "shikikin". The last place however (and for reasons that I won't go into) that I was more or less "obliged" to accept, charged me TWO months "reikin" and THREE months "shikikin" and the owner of the house was none other than the president of the housing agency himself!
The "problems" started the very next day after moving in. When I came down in the morning I found the kitchen floor soaking wet and discovered the bathroom upstairs was leaking through the ceiling... Apparently, it wasn't the only thing that was leaking. The house walls and cupboards were constantly damp.
That first night, I thought I heard the "patter of tiny feet" in the ceiling over my bedroom, but was told by my landlord that it must have been the "wind"??? I finally took a "sample" of the "wind droppings" that I found on the carpet in my bedroom to the "hokenjou" and they called the landlord themselves to tell him to take care of the rat/dani infestation..
It was also the very first time I was asked for a "renewal" fee - which I paid only once although we stayed there for 8 years. (I refused to pay after that one time). .
Knowing this landlord would NEVER pay any of my "shikikin" back, when we decied to finally buy our own place, I just didn't bother to pay the "25 man/month" for the last six months! So far, so good. That was two years ago and he still hasn't "contested" it! And if ever he does, I'll be getting him to pay for MY armchairs and beds that I had to throw out because they were infested with "dani".
southsakai
Hello Yagura, Wow you made a very good post above packed with some great info from your own personal experiences. Thanks a lot. I'm sure it will help many especially the new ones moving in. Cheers
Pukey2
The last rental agency tried to charge me for changing wallpapers and tatami mats and whatnot (even increasing the size of the tatami). I managed to get them to reduce the price, but I was still angry at being charged for something that degrades naturally (tatami), and for something that was as good as new (wallpaper). I scrubbed the place from top to bottom and we did the same for my colleague's place when he moved. Both times, we were charged for 'cleaning'. The moral of the story - don't bother cleaning the place too much. Just vacuum and wipe. I left my old place cleaner than the new place I moved into! They also told me regularly that if I wanted something like getting the tatami mats changed, etc, to just contact them - fat chance! It's just another way for them to make a profit. I kept the same mats for nearly a decade - faded but absolutely nothing wrong.
tmarie
You legally can't be charged for tatami and wallpaper from my understanding. Thing is, no one questions it. And yes, I would demand receipts and the like if they ever try and charge you for cleaning. Clean home, not here. That being said, your place shouldn't need a massive clean up if you look after it well.
cactusJack
I remember once there was a place that was advertised as "no key money"...I went and saw the place (a dump really, but cheap), and then said to the agent, "I'll take it"...then on the way back to the estate office to sign the papers, the agent said, "Ummm...I think the owner will want some key money for that place". What a scam!!!
jessebaybay
The security deposit ( Bond or shikikin depending on where your from) is reasonable and necessary IMO. Im happy that the key money is coming down though, that one just doesn't make any sense at all.
nath
This is WONDERFUL news! No more extortion by landlords! Woohoo!
Stephen Colkos
This excites my because it will cut my initial cost, moving commences in a few months!!!!!!!!!!!!!!!!!!!!!!!!!