[For Foreigners] What is a fixed-term lease? Explanation of the differences from a regular lease and points that foreigners should know.

A standard rental agreement in Japan refers to a typical rental contract.

Typically, the contract period is two years (sometimes one year), but in principle, you can renew the contract if you wish to continue living in the house.

For a homeowner (landlord) to refuse to renew a lease, there must be a very strong reason, such as "the landlord has no other place to live" (this is called a "just cause").

In short, a fixed-term lease is a contract with a predetermined term.

Unlike regular rental properties, there is no concept of "renewal." When the contract period ends, you are generally required to move out of the room.

If you wish to do so and the owner agrees, a contract renewal is possible, but it is not guaranteed.

Why does the "fixed-term lease" contract style exist?

The typical Japanese rental agreement, which generally allows tenants to renew the contract and continue living in the same room if they wish, will likely seem very appealing.

So, in Japan, where tenant rights are generally strongly guaranteed, why does the fixed-term lease contract exist?

This is related to the owner's circumstances, such as wanting to rent out the room for only a certain period of time for some reason.

example:

• I want to rent it out for a limited time until the owner returns from their overseas assignment.
• My child is planning to live there.
• There are plans to rebuild the apartment building, and other reasons.

As explained above, there are specific reasons why the property is a fixed-term lease, and therefore, when the contract period ends, you must leave the property.

Differences between rental agreements in Japan and overseas

In Japan, regular leases are the most common type of contract, and fixed-term leases are an exceptional system.

However, this is not the case overseas.

Overseas, fixed-term lease agreements are more common. For example, when a one-year contract period ends, the tenant and owner discuss whether to renew the contract. If the owner refuses to renew, the tenant cannot continue to live in the same room.

However, in Japan, the rights of tenants are strongly protected. This is a very generous system compared to other countries. As a result, many people continue to renew their contracts and live in the same property for a long time.

Percentage of fixed-term leases in the rental market

According to the Ministry of Land, Infrastructure, Transport and Tourism's " Housing Market Trends Survey (2022) ," the ratio of regular rental housing to fixed-term rental housing in Japan is as follows:

• Standard rental housing: 94.8%
• Fixed-term lease: 2.1%

As can be seen from this, the most common type of rental agreement in Japan is a standard lease, and fixed-term leases are an exceptional contract style.

Now, let's take another look at the differences between fixed-term leases and regular leases from four key points.

Difference ①: Whether or not the contract is renewed (fixed-term leases are not renewed)

• Standard rental property: In principle, the lease is renewed if the tenant wishes.
• Fixed-term lease: The contract automatically terminates upon expiration of the term. A "renewal contract" is required to continue living there.

As explained above.

Difference ②: Contract and explanation method (fixed-term leases require special explanations)

• Standard rental property: Explanations and contracts are made in writing using documents such as the Important Matters Explanation Document.
• Fixed-term lease: In addition to the above, the landlord must provide a written explanation that the lease is a fixed-term lease with no renewal option and will terminate upon expiration of the term.

Since fixed-term leases are not common in Japan, it is mandatory to notify the landlord in writing.

Difference ③: Whether or not early termination is possible (fixed-term leases are generally not allowed).

• Standard rental property: In many cases, you can terminate the contract with one month's notice.
• Fixed-term lease: In principle, early termination is not permitted (exceptions apply).

In a standard lease agreement, the tenant can terminate the contract midway through the term at their own discretion. However, with a fixed-term lease, the contract period is predetermined, so generally, termination during that period is not possible.

However, even with a fixed-term lease, the tenant can request termination of the contract if the following conditions are met.

1. The property must be a residential property with a floor area of less than 200 square meters.
2. There are unavoidable circumstances such as job relocation, medical treatment for an illness, or caring for a relative.

In addition, the contract may include a rule (special clause) stating that "the contract can be terminated midway through the term with one month's notice."

Difference ④: Contract renewal/change of terms (Terms may change for fixed-term leases)

• Standard rental property: Generally continues under the same conditions.
• Fixed-term lease: Terms and conditions may change upon contract renewal.

In standard rental agreements, contract renewal is a given, so rent and contract terms generally remain the same. Landlords are legally restricted from significantly changing contract terms, and tenants' rights are strongly protected.

On the other hand, with a fixed-term lease agreement, the contract ends when the contract period expires, so a new contract is required if you wish to continue living there. Since a new contract is concluded, the landlord can freely set the rent and contract terms, and in some cases the terms may change.

Comparison Table: Main Differences Between Fixed-Term Leases and Standard Leases

In Japanese rental agreements, where tenants' rights are strongly guaranteed, it might seem that there is no advantage to deliberately choosing a property with a fixed-term lease.

However, there are also advantages to fixed-term leases that are unique to foreigners.

The rent is sometimes cheaper than other properties in the area.

Because fixed-term leases have less favorable conditions than regular leases, properties with similar floor plans are often priced lower than other properties in the surrounding area.

This would be a significant advantage for foreigners who want to keep their living expenses as low as possible.

You might find a high-quality property that the owner has carefully selected.

In some cases, fixed-term leases are offered with the owner intending to live in the property themselves in the future. Therefore, you may find great deals on properties that are not typically available for rent, such as a unit in a high-grade condominium, a property that comes furnished with stylish furniture and appliances, or a well-maintained detached house.

It is reasonable for people with a fixed length of stay, such as those studying abroad or on short-term jobs.

For foreigners whose length of stay in Japan is fixed due to visa or work-related reasons, a fixed-term lease can actually be a rational choice. This is because by deliberately choosing a fixed-term lease, they can gain the advantages explained above.

However, on the other hand, we must also be aware of the disadvantages unique to fixed-term leases.

Even if you like it, there's a possibility you won't be able to continue living there.

This is arguably the biggest drawback. No matter how much you love the house and want to live there permanently, if the owner doesn't intend to renew the contract, you'll have to move out when the contract expires.

When renewing the contract, terms such as rent may change.

Even if the owner agrees to renew the contract, it doesn't necessarily mean you'll be able to live there under the same conditions as before. The terms may change, such as "We're raising the rent by 5,000 yen from the next contract onwards" or "We're adding new rules."

Even in the case of a sudden return to Japan or relocation, early termination of the contract is generally not permitted.

In principle, you cannot terminate the contract for your own reasons during the contract period. Even if you are able to terminate it, you may be charged a penalty fee equivalent to the rent for the remaining period.

There are few properties available (especially in urban areas).

As is clear from the percentage of fixed-term leases explained above, the number of properties available under fixed-term leases is limited. Therefore, even if you are determined to live in a house with a fixed-term lease, you may not be able to find a property that meets your needs.

Now, let's look at the process and key points to check when signing a lease agreement for a fixed-term lease.

Step 1: Check the property information for the "fixed-term lease" designation.

Properties with fixed-term leases will always have that indicated. Therefore, look for properties with the "fixed-term lease" designation on real estate websites or through real estate agents.

Some real estate websites specialize in listings of fixed-term leases only (e.g., Able ).

Searching for fixed-term lease properties on such information websites is the most efficient method.

Step 2: Receive the "Fixed-Term Lease Explanation Document" from the real estate company and listen to the explanation.

Once you find a fixed-term lease property you like, ask the real estate agent for a "Fixed-Term Lease Explanation Document" and listen to their explanation. This document contains information you should know when renting a fixed-term lease property, such as the contract period and other conditions.

If you agree to those terms, we will proceed with the contract.

Step 3: Five items you should always check in the contract.

Before signing the contract, be sure to check the following five points.

1. Contract period: When is the expiration date?
2. Contract renewal clause: Is there a possibility of contract renewal?
3. Special clauses regarding early termination: What are the conditions for termination in unavoidable circumstances?
4. Scope of restoration to original condition: What repairs are required upon vacating the property?
5. Notification Obligation: When will I receive the lease expiration notice from the landlord?

These are very important factors when considering renting a property under a fixed-term lease agreement.

For more details on restoring the property to its original condition, please see "What is the average cost of moving out? A guide to renting in Japan for foreigners."

Step 4: [Professional Advice] Ask about the possibility of renewing the contract.

Before signing the contract, I recommend asking one more question:

• "Do you, the owner, have any plans to renew the contract in the future?"

Of course, the answer given at that point does not guarantee the future. However, your decision will undoubtedly change significantly depending on whether you are told, "I'm planning to return from my transfer, so there will be absolutely no contract renewal," or "Unless there are any particular issues, we are positively considering renewing your contract."

Finally, we have compiled some frequently asked questions about fixed-term leases.

Q. When and to whom should I inform if I want to renew my contract?

A. It's common to contact the real estate company managing the property. It's best to inform them of your intention to renew the contract about six months to three months before the contract expires. Giving them early will give the owner time to consider your options.

Q. When can I expect to receive notice of contract termination from the landlord?

A. By law, the landlord must notify the tenant that "this contract will terminate on [date]" between one year and six months before the contract expires. If this notice is not given, the landlord may not be able to assert the termination of the contract.

Q. Can I live in a property that says "renewable fixed-term lease" indefinitely?

A. If the contract is labeled "renewable," it indicates that the landlord is open to renewal from the start, making it highly likely that you will be able to continue living there. However, this is not legally guaranteed. Remember that it is still a fixed-term lease agreement, and there is a risk that the landlord's circumstances may change in the future, making renewal impossible.

Q. Is it possible that I will only be offered fixed-term leases because I am a foreigner?

A. Generally, being a foreigner doesn't mean you'll only be shown fixed-term leases. However, some landlords may be concerned about communication difficulties and cultural differences, and may suggest fixed-term leases to foreigners whose length of stay is uncertain. If you feel uneasy, don't hesitate to ask them to also show you regular lease properties.