Legal help for those on a limited budget

“I recently moved out of a house that I rented for about five years. A few weeks later the owner sent me a message asking for ¥450,000 on top of the ¥70,000 he had for the deposit. This house is over 35 years old and was falling apart when I moved in, and he never made any repairs over the five years I lived there. My girlfriend and I had bad health problems due to the black mold, bad sewage system, and the bats living in the roof.

“I just received a huge package stating I have to go to court next month and he now wants ¥900,000. He also included more lies and pictures. I have no idea what to do; I can’t afford an attorney.”

Fortunately, there are legal resources available in Japan for those with low or no income. The Japan Legal Support Center can connect you with a variety of other helpful organizations depending on your situation and location. As long as you have a valid visa and are residing in Japan legally, they can provide legal services for those with limited means. It’s possible that not all resources will be in English, so you may need to call on a Japanese-speaking friend to help.

The Support Center has English-speakers, but they’ll answer the phone in Japanese. The number is (0570) 07-8374. You can also visit their site at

Keep in mind that in order to take advantage of these services, you’ll usually be asked to provide proof of financial hardship.

Once settled in, chances are you’ll have to pay to stay

In Japan, property rental renewal fees can cost around one month’s rent per year. The question is: What is it tenants are paying for?

On July 15, the Supreme Court of Japan ruled that it is legal for property owners to demand supplemental fees when tenants renew their rental agreements. The ruling was made in conjunction with three lawsuits that tenants had brought against their landlords claiming that koshinryō should be considered invalid in accordance with the Consumer Contracts Law. In all three cases the tenants had paid the renewal fees and were suing to get the money back. The landlords argued that the renewal fees were stipulated in the rental agreements the tenants signed.

The Osaka High Court previously agreed with the plaintiffs in two of the cases, ruling that the renewal fees did violate the Consumer Contract Law, which states that a contract can be voided if its conditions are deemed inherently disadvantageous to the consumer. The Supreme Court, however, found that a renewal fee is reasonable “unless it is too high in comparison with rent or rental agreement periods.” The consumers in these cases, it said, did not suffer any damage.

Those who have had success in fighting these fees usually received assistance from nonprofit and nongovernmental organizations. The Asahi Shimbun recently reported the case of a 60-year-old man in Chiba Prefecture who refused to pay his renewal fee (as did his guarantor) and took his complaint to the prefectural tenants union, which negotiated with the landlord. The union cited the Rental Property Law, which states that a rental agreement is automatically renewed if the tenant wishes to stay there and that a tenant cannot be evicted without reason. Eventually, the landlord waived the fee.

Landlords, however, are on the defensive. Though they claimed victory, it’s a tenants’ market. In 2008, the Ministry for Internal Affairs reported the nationwide vacancy rate for rental properties at 23 percent (as reference, Tokyo’s was 16 percent) and rising. Rental management companies increasingly provide greater transparency in rental agreements and fewer landlords are asking for gift money so as to attract potential tenants. Some realtors now advertise properties with the “adjusted” monthly rent, meaning the monthly rent plus the added fees pro-rated on a monthly basis. It doesn’t make those fees any less arbitrary, but at least it makes the transaction more open.

Tokyo Landlords Lose Century-Old ‘Gift Money’ as Rents Slump

After viewing almost 100 Tokyo apartments, banker Damien Cambon was happy to discover that a Japanese tradition dating back more than a century is dying: the payment of up to two months’ rent extra as a gift to the landlord.

“Reikin,” or “gift money,” a non-refundable fee on top of a deposit and any broker fees that has helped boost landlords’ earnings since at least 1897, is the latest victim of a slump in the market in the world’s second-most expensive city. Rents in Tokyo’s five central wards fell to an average 4,165 yen per square meter in June, the lowest since the Japan Real Estate Institute started tracking prices in 1998.

“My broker would say, ‘forget about the gift money,’ and the landlords would all say, ‘OK,’” said Cambon, 29, who works for a U.S.-based bank he declined to name. “This was a very good surprise.”

As Prime Minister Naoto Kan considers injecting as much as 4.6 trillion yen ($55 billion) into the economy to create jobs, boost consumption and stem 12 years of deflation, Tokyo landlords are also trying to stimulate the rental market by scrapping reikin and waiving as much as five months’ rent for new leases.

“The rental property business is changing,” said Yoshiya Watanabe, a real estate agent at Atland co. in Tokyo. “If you eliminate reikin, you get better turnaround” for vacant units.

While landlords of luxury Tokyo apartments rented for 500,000 yen or more have waived reikin in the past, as many as 65 percent of units below that tier now don’t require gift money, compared with about 25 percent two years ago, Watanabe said.

Rooftop, Terrace

Cambon said his previous landlord lowered his rent 13 percent at the end of his two-year lease and waived the contract renewal fee of one-month rent. Even so, he opted for a new apartment with a terrace and rooftop access.

The September 2008 bankruptcy of Lehman Brothers Holdings Inc. and the recession that followed prompted a drop in occupancy rates, said Hirotaka Uruma, chief financial officer at Daiwa House Morimoto Asset Management Co. The company oversees BLife Investment Corp., a residential real-estate investment trust that manages 8,116 apartments in Tokyo.

“Waiving reikin has become the norm,” he said. “When your competitors are also waiving it, it doesn’t make sense for us to keep demanding it.”

BLife’s residential occupancy rates in Tokyo’s five central wards dropped to 85 percent in November from 94 percent a year earlier, he said. In the same period, gift-money income as a proportion of total revenue for BLife dropped to 0.3 percent from 1.65 percent, Uruma said.

‘Doesn’t Make Sense’

“In the long run, reikin will completely disappear because this is a system that doesn’t make sense,” said Yoji Otani, a real estate analyst at Deutsche Bank AG in Tokyo. Eliminating the fee “will make it easier for tenants to move around, which is good for brokerage companies, but bad for residential REITs.”

Gift money dates back to as early as 1897 when it was documented in a contract for a property in Tokyo’s Chiyoda ward, according to “Japan’s Rental Property (1995),” a book by Nobuhisa Segawa, a law professor at Hokkaido University. The practice originated to offset rising land prices while ensuring rents for new tenants weren’t substantially different from what their neighbors were paying, according to Segawa. Reikin income is typically split between the broker and owner.

Landlords who are holding on to the practice, also known as “key money,” include those who have inherited their property and are less concerned about vacancy, Watanabe said.

Not in New York

Demanding key money is illegal in New York, according to the New York City Rent Guidelines Board. The practice is no longer prohibited in England, though landlords typically don’t charge a “premium,” which gives tenants the right to assign tenancy to a third party, according to Tessa Shepperson, a lawyer in Norwich.

Tokyo Governor Shintaro Ishihara said in a 2004 policy statement that reikin as well as contract renewal fees should be eliminated. While the city’s position has not changed, it can’t legally force landlords to abolish the fee, said Kazuo Onoda, who works on the city’s efforts to improve housing policies. The decline of reikin “is a result of market forces,” he said.

Even after Japan’s land prices tumbled the most in 13 years in 2009, Tokyo is still the second-most expensive city in the world for expatriates behind Luanda, Angola, based on Mercer LLC’s Cost of Living Survey released in June that compares housing, food, gasoline, movie and other prices. Rent for a mid- range two-bedroom unfurnished apartment in Japan’s capital averaged $4,436 a month, compared with $3,906 in London and $4,000 in New York, according to the study.

Reikin’s Return?

Some landlords say reikin payments may return once Japan’s property market recovers.

“At the moment, new supply is very limited,” said Atsushi Ogata, chief executive officer of Nomura Real Estate Asset Management Co. which manages a residential and an office REIT. “In a couple of years, we may face another good market, with demand outpacing supply, in which case we can probably charge as much reikin as before.”

Total gift-money income dropped by about half on average in March and April, when the majority of new tenants move in, from a year earlier, Ogata said.

Meanwhile, it’s a tenants’ market in Tokyo, as rent has dropped by as much as 15 percent since 2007, said Mikihisa Hirai, president of Tokyo-based Atlas Partners Japan Ltd., which owns more than 2,000 apartments in Nagoya, Osaka and Tokyo.

“In order to attract new tenants, owners would rather forget the gift money, especially when properties are owned by funds,” he said. “Investors can no longer count on reikin.”

Japan, U.N. share blind spot on ‘migrants’

I wish to speak about the treatment of those of “foreign” origin and appearance in Japan, such as white and non-Asian people. Simply put, we are not officially registered — or even counted sometimes — as genuine residents. We are not treated as taxpayers, not protected as consumers, not seen as ethnicities even in the national census. According to government polls and surveys, we do not even deserve the same human rights as Japanese. The view of “foreigner” as “only temporary in Japan” is a blind spot even the United Nations seems to share, but I will get to that later.

First, an overview: The number of non-Japanese (NJ) on visas of three months or longer has increased since 1990 from about 1 million to over two. Permanent residents (PR) number over 1 million, meaning about half of all registered NJ can stay here forever. Given how hard PR is to get — about five years if married to a Japanese, 10 years if not — a million NJ permanent residents are clearly not a temporary part of Japanese society.

Moreover, this does not count the estimated half-million or so naturalized Japanese citizens (I am one of them). Nor does this count children of international marriages, about 40,000 annually. Mathematically, if each couple has two children, eventually that will mean 80,000 more ethnically diverse Japanese children; over a decade, 800,000 — almost a million again. Not all of these children of diverse backgrounds will “look Japanese.”

What’s more, we don’t know Japan’s true diversity because the Census Bureau only surveys for nationality. This means when I fill out the census, I write down “Japanese” for my nationality, but I cannot indicate my ethnicity as a “white Japanese,” or a “Japanese of American extraction” (amerikakei nihonjin). I believe this is by design — because the politics of identity in Japan are all about “monoculturality and monoethnicity.” Given modern Japan’s emerging immigration and assimilation, this is a fiction. The official conflation of Japanese nationality and ethnicity is incorrect, yet our government refuses to collect data that would correct that.

The point is we cannot tell who is “Japanese” just by looking at them. This means that whenever distinctions are made between “foreigner” and “Japanese,” be it police racial profiling or “Japanese only” signs, some Japanese citizens will also be affected. Thus we need a law against racial discrimination in Japan — not only because it will help noncitizens assimilate into Japan, but also because it will protect Japanese against xenophobia, bigotry and exclusionism, against the discrimination that is “deep and profound” and “practiced undisturbed in Japan,” according to U.N. Rapporteur Doudou Diene in 2005 and 2006.

There are some differences in viewpoint between my esteemed colleagues here today and the people I am trying to speak for. Japan’s minorities as definable under the U.N. Convention on the Elimination of Racial Discrimination (CERD), including Ainu, Ryukyuans, zainichi special-permanent- resident ethnic Koreans and Chinese, and burakumin, will speak to you as people who have been here for a long time — much longer than people like me, of course. Their claims are based upon time-honored and genuine grievances that have never been properly redressed. For ease of understanding, I will call them the “oldcomers.”

I will try to speak on behalf of the “newcomers,” i.e., people who came here relatively recently to make a life in Japan. Of course both oldcomers and newcomers contribute to Japanese society, in terms of taxes, service and culture, for example. But it is we newcomers who really need a Japanese law against racial discrimination, because we, the people who are seen because of our skin color as “foreigners,” are often singled out for our own variant of discriminatory treatment. Examples in brief:

1. Housing, accommodation
One barrier many newcomers face is finding an apartment. According to the Mainichi Shimbun (Jan. 8), on average in Tokyo it takes 15 visits to realtors for an NJ to find an apartment. Common experience — this is all we have because there is no government study of the problem — dictates that agents generally phrase the issue to landlords as, “The renter is a foreigner, is that OK?” This overt discrimination happens with impunity in Japan. One Osaka realtor even advertises apartments as “gaijin allowed,” a sales point at odds with the status quo. People who face discriminatory landlords can only take them to court. This means years, money for lawyers and court fees, and an uncertain outcome — when all you need is a place to live, now.

Another barrier is hotels. Lodgings are expressly forbidden by Hotel Management Law Article 5 to refuse customers unless rooms are full, there is a clear threat of contagious disease, or an issue of “public morals.” However, government surveys indicate that 27 percent of all Japanese hotels do not want foreign guests, period. Not to be outdone, Fukushima Prefecture Tourist Information advertised the fact that 318 of their member hotels refuse NJ. Thus even when a law technically forbids exclusionism, the government will not enforce it. On the contrary, official bodies will even promote excluders.

2. Racial profiling by police
Another rude awakening happens when NJ walk down the street. All NJ (but not citizens) must carry ID cards at all times or face possible criminal charges and incarceration. So Japanese police will target and stop people who “look foreign” in public, sometimes forcefully and rudely, and demand personal identification. This very alienating process of “carding” can happen when walking while white, cycling while foreign-looking, using public transportation while multiethnic, or waiting for arrivals at airports while colored. One person has apparently been “carded,” sometimes through physical force, more than 50 times in one year, and 125 times over 10 years.

Police justify this as a hunt for foreign criminals and visa over-stayers, or cite special security measures or campaigns. However, these “campaigns” are products of government policies depicting NJ as “terrorists, criminals and carriers of infectious diseases.” None of these things, of course, is contingent upon nationality. Moreover, since 2007, all noncitizens are fingerprinted every time they re-enter Japan. This includes newcomer PRs, going further than the US-VISIT program, which does not refingerprint Green Card holders. However, the worst example of bad social science is the National Research Institute of Police Science, which spends taxpayer money on researching “foreign DNA” for racial profiling at crime scenes.

In sum, Japan’s police see NJ as “foreign agents” in both senses of the word. They are systematically taking measures to deal with NJ as a social problem, not as fellow residents or immigrants.

3. Exclusion as ‘residents’
Japan’s registration system, meaning the current koseki family registry and juminhyo residency certificate systems, refuse to list NJ as “spouse” or “family member” because they are not citizens. Officially, NJ residing here are not registered as “residents” (jumin), even though they pay residency taxes (juminzei) like anyone else. Worse, some local governments (such as Tokyo’s Nerima Ward) do not even count NJ in their population tallies. This is the ultimate in invisibility, and it is government-sanctioned.
4. ‘Japanese only’ exclusion

With no law against racial discrimination, “No foreigners allowed” signs have appeared nationwide, at places such as stores, restaurants, hotels, public bathhouses, bars, discos, an eyeglass outlet, a ballet school, an Internet cafe, a billiards hall, a women’s boutique — even in publicity for a newspaper subscription service. Regardless, the government has said repeatedly to the U.N. that Japan does not need a racial discrimination law because of our effective judicial system. That is untrue.

For example, in the Otaru onsen case (1999-2005), where two NJ and one naturalized Japanese (myself) were excluded from a public bathhouse, judges refused to rule these exclusions were illegal due to racial discrimination. They called it “unrational discrimination.” Moreover, the judiciary refused to enforce relevant international treaty as law, or punish the negligent Otaru City government for ineffective measures against racial discrimination. The Supreme Court refused to hear the case.

Furthermore, in 2006, an openly racist shopkeeper refused an African-American customer entry, yet the Osaka District Court ruled in favor of the owner! Japan needs a criminal law, with enforceable punishments, because the present judicial system will not fix this.

5. Unfettered hate speech
There is also the matter of the cyberbullying of minorities and prejudiced statements made by our politicians over the years. Other NGOs will talk more about the anti-Korean and anti-Chinese hate speech during the current debate about granting local suffrage rights to permanent residents.

I would instead like to briefly mention some media, such as the magazine “Underground Files of Crimes by Gaijin” (Gaijin Hanzai Ura Fairu (2007)) and “PR Suffrage will make Japan Disappear” (Gaikokujin Sanseiken de Nihon ga Nakunaru Hi (2010)). Both these books stretch their case to talk about an innate criminality or deviousness in the foreign element, and “Underground Files” even cites things that are not crimes, such as dating Japanese women. It also includes epithets like “nigger,” racist caricatures and ponderings on whether Korean pudenda smell like kimchi. This is hate speech. And it is not illegal in Japan. You could even find it on sale in convenience stores.

In light of all the above, the Japanese government’s stance towards the U.N. Convention on the Elimination of Racial Discrimination is easily summarized: The Ainu, Ryukyuans and burakumin are citizens, therefore they don’t fall under the CERD because they are protected by the Japanese Constitution. However, the zainichis and newcomers are not citizens, therefore they don’t get protection from the CERD either. Thus, our government effectively argues, the CERD does not cover anyone in Japan.

Well, what about me? Or our children? Are there really no ethnic minorities with Japanese citizenship in Japan?

In conclusion, I would like to thank the U.N. for investigating our cases. On March 16, the CERD Committee issued some very welcome recommendations in its review. However, may I point out that the U.N. still made a glaring oversight.

During the committee’s questioning of Japan last Feb. 24 and 25, very little mention was made of the CERD’s “unenforcement” in Japan’s judiciary and criminal code. Furthermore, almost no mention was made of “Japanese only” signs, the most indefensible violations of the CERD.

Both Japan and the U.N. have a blind spot in how they perceive Japan’s minorities. Newcomers are never couched as residents of or immigrants to Japan, but rather as “foreign migrants.” The unconscious assumption seems to be that 1) foreign migrants have a temporary status in Japan, and 2) Japan has few ethnically diverse Japanese citizens.

Time for an update. Look at me. I am a Japanese. The government put me through a very rigorous and arbitrary test for naturalization, and I passed it. People like me are part of Japan’s future. When the U.N. makes their recommendations, please have them reflect how Japan must face up to its multicultural society. Please recognize us newcomers as a permanent part of the debate.

The Japanese government will not. It says little positive about us, and allows very nasty things to be said by our politicians, policymakers and police. It’s about time we all recognized the good that newcomers are doing for our home, Japan. Please help us.

New real estate guarantor service set up for foreign residents

A Tokyo non-profit organization has set up a new real estate guarantor service for foreign residents negotiating Japan’s notoriously discriminative housing system.

The service, the first of its kind, is set up by the Information Center for Foreigners in Japan and will start offering guarantor services in Tokyo and surrounding prefectures in South Korean and Chinese later this month. The services will later be expanded to cover people from English-speaking countries.

The service was set up after a 2006 questionnaire showed that foreign residents in Tokyo were visiting an average of 15 real estate agents before finding a landlord willing to lease a home to them. Common excuses given were language problems, different lifestyle habits and fears over non-payment of rent.

Prospective lessees will pay 40-60 percent of their monthly rent as an initial payment, followed by 10,000 yen a year every subsequent year. In turn, the service provider will guarantee up to a year’s missed rent to landlords. Lessees can also receive the service provider’s information packs on living in Japan.

South Korean student Kim Yon-min, 23, says: “I’ve got friends who have been told ‘no foreigners allowed’ by real estate companies. I’m still not confident about my Japanese, so this kind of service makes me feel reassured.”

“When I first arrived in Japan, I was in trouble because no one was willing to be my guarantor,” says a 28-year-old Indonesian designer. “I think other Indonesians will ask for this kind of service.”

The Information Center for Foreigners in Japan was set up in 1995 to aid foreign victims of the Great Hanshin Earthquake. It provides volunteer Japanese lessons, and provide information on living in Japan to the editors of newsletters in 14 languages.

Court reverses ruling on housing renewal fees

The Osaka High Court has ordered the landlord of an apartment building in Kyoto to return lease renewal fees paid by a former tenant, reversing a lower court decision.

In the lawsuit, the 54-year-old male company employee of Kyoto had asked the landlord to return about 550,000 yen, claiming he had paid the money according to a clause in his rental contract that he now believed violated the consumer contract law.

In Thursday’s ruling, presiding Judge Kitaru Narita stated that the clause unilaterally undermines the interests of consumers and therefore is void under the consumer contract law.

The judge ordered the landlord to return about 450,000 yen to the man.

The ruling reversed a Kyoto District Court decision given in January last year dismissing the man’s request that the money be returned.

The landlord plans to appeal.

Four similar rulings over renewal fees have so far been handed down at district courts in Tokyo, Kyoto and other places.

While tenants lost in three of the four rulings, the Kyoto District Court in July became the first district court to rule in favor of a tenant in the cases.

Thursday’s ruling was the first of its kind given by a high court.

According to the ruling, the man signed a contract in 2000 to pay 45,000 yen in monthly rent and an annual renewal fee of 100,000 yen.

He paid the renewal fees five times until August 2005, and he moved out in November 2006. He filed the lawsuit in 2007.

The first ruling regarded the fees as advance rental payments. However, the judge at the high court said the amount was unreasonably high for an advance payment.

The judge also said the Land and House Lease Law stipulates that landlords cannot refuse to renew a contract without sufficient cause, but that the landlord had demanded the tenant pay the contract renewal fees without any explanation.

The judge further said it could be presumed the landlord had given the tenant the impression that his monthly payment was low by collecting renewal fees, leading him to renew the contracts.

The judge then ordered the landlord to reimburse the total amount of the renewal fees the tenant had paid since the revised consumer contract law was put into effect in 2001, as well as a deposit he paid when he first entered the apartment after deducting his unpaid rent from it.

Court negates renewal fees

The high court here Thursday ordered a landlord to return money to a tenant who paid a fee when renewing his apartment contract, overturning a lower court decision.

The ruling was the first by a high court and follows a landmark ruling in July by the Kyoto District Court which also invalidated the contract renewal fee.

The plaintiff in the latest case had sought the return of about 550,000 yen in contract renewal and other fees.

The Kyoto District Court in January 2008 ruled against the man, but the Osaka High Court overturned the decision and ordered the landlord to return 450,000 yen.

Political shift gives hope to gays

The likelihood that the Democratic Party of Japan, the last party to submit [an antidiscrimination law] bill, will dominate the powerful House of Representatives in an alliance with the Social Democratic Party, which speaks out for homosexual rights, has raised hopes that the inertia may at last be overcome.

This was echoed by Boris Dittrich, advocacy director of the gay, lesbian, bisexual and transgender program at Human Rights Watch, who visited Japan last month. He met with key opposition party figures to discuss Japan’s future on issues of sexual orientation.

“There is no law in Japan that protects people who are being discriminated on the basis of sexual orientation,” Dittrich told reporters on July 22.

“So for instance, a landlord would evict somebody because he is gay or she is lesbian and there is no law that you can refer to for protection,” he added. Dittrich himself was a publicly gay politician in his home country, the Netherlands, where he was a pioneer in securing homosexual rights.

In Japan, a government-sponsored antidiscrimination bill submitted to the Diet in 2002, but later abandoned, would have protected the rights of homosexuals along with other groups, including “burakumin,” or descendants of former outcast communities such as tanners, according to Kanae Doi, Tokyo director of Human Rights Watch. The 2002 bill and another one proposed by the DPJ were both scrapped because the lower chamber was dissolved before they could be fully deliberated and voted on.

SDP leader Mizuho Fukushima, who also met with Dittrich during his trip, agreed human rights is a sensitive topic in the Diet, and the subject of sexual orientation faces a particularly tough time as people do not necessarily feel it is relevant to them.

If the DPJ wins Sunday, Fukushima predicts a slow but steady improvement in homosexual rights.

“It won’t be, for example, that same-sex marriages will be recognized immediately. But for now we must educate people, eradicate bullying and make people understand that these problems exist in society,” she said

According to Human Rights Watch’s [Tokyo director Kanae] Doi, Japan is falling behind global standards by not having an antidiscrimination law other than that protecting gender equality.

“An antidiscrimination law exists almost everywhere else in the world. But in Japan, since there is no law protecting sexual orientation, gender identity, ethnicity or race, it is difficult for such people to prosecute,” she said.

Shakeup in tenant terms

A shock wave hit the real estate industry when the Kyoto District Court ruled July 23 that an apartment tenant did not have to pay a fee to renew his lease, a fee landlords levy on average every two to three years.

This “koshin-ryo” charge demanded by landlords is an old custom in many parts of Japan. Many foreigners are surprised when asked to pay it because this custom does not exist in their home countries.

While real estate agencies try to play down the impact of the ruling because it does not automatically apply to all similar disputes, lawyers believe this will set a precedent for renters to refuse to pay landlords a fee they regard as over the top.

“I will use the ruling the Kyoto District Court handed down,” said Kyohei Niitsu, a lawyer at Niitsu Legal Visa Office in Tokyo. The firm specializes in advising foreigners.

“I will notify my clients who don’t know this, tell them they may not have to pay renewal fees and negotiate with their real estate agencies for them,” he said.

The renewal fee real estate agencies charge varies by prefecture. A survey by the Land, Infrastructure, Transport and Tourism Ministry found that 65 percent of real estate agencies in Tokyo charge an average of one month’s rent in renewal fees, while 90.1 percent in Kanagawa Prefecture charge 0.8 month’s rent and 55.1 percent in Kyoto Prefecture charge 1.4 month’s rent.

Many foreigners are not used to paying a renewal fee, let alone the other uniquely Japanese custom of “reikin” (“key money”) that’s paid when a renter moves in.

“Lots of my clients say it is ridiculous for landlords to charge a large lump sum (for key money and renewal fees), which is nonsense to foreigners,” said Edmond Courtroul, a lawyer registered in Texas who mainly deals with commercial clients rather than individuals. “Now the ruling is precedent, so they should take (renewal fees) out of contract.”

The survey by the land ministry found that half of the real estate agencies that responded claimed they charge the renewal fees and key money simply because it is a long-standing custom.

To be sure, in addition to the key money and renewal fees, many real estate agencies collect a deposit, typically worth one to four months’ rent, as insurance against a renter’s suddenly bolting without paying.

Landlords typically keep all the key money but split the renewal fee with the real estate agency.

Landlords collecting renewal fees violates tenants’ rights

In what experts termed a landmark ruling, the well-established practice of landlords collecting renewal fees in the housing rental industry was judged illegal Thursday and a violation of tenants’ rights.

The point of contention in the Kyoto District Court ruling Thursday was the “contract renewal fees” for renting houses and apartments, which tenants are obliged to pay their landlords every time their contracts are renewed.

In many cases, the fees are equal to two months’ rent and must be paid by lump sum, putting a heavy financial burden on tenants every few years, in addition to the “key money” that is required when a tenant first enters into a contract.

In the lawsuit, a Kyoto man had demanded that his landlord return 460,000 yen, comprising 110,000 yen in contract renewal fees and 350,000 yen in key money, based on the law to protect consumers in business deals.

Calling the fees a “unilateral infringement on consumer benefits,” presiding Judge Toshio Tsujimoto ruled that the practice has no legally justifiable grounds and ordered the landlord to return the full amount.

Legal experts said the ruling is rare in that it is based on the consumer protection law rather than the law to define the rights of landlords and tenants in house deals. The ruling is expected to affect similar lawsuits pending nationwide.

In April 2006, the man made a two-year contract to rent an apartment in the city and paid about ¥110,000 — the equivalent of two months’ rent — to his landlord in January 2008, when the initial contract approached renewal. But he terminated the contract four months later and vacated, the court said.

“Reasons for charging contract renewal fees must be clearly explained to tenants and agreed upon between the two sides,” the judge said.

Praising Thursday’s ruling, lawyers for the plaintiff told reporters later Thursday that the Kyoto case would become a significant step forward to reform the country’s housing rental industry, which they said has many traditional unwritten codes and rules not accompanied by clear explanations.

“Renewal fees are charged in a lump sum regardless of the span of contracts. In reality, landlords rarely give advance notice until a renewal approaches in a few months, and tenants are effectively forced to pay the fees,” they said in a statement.

People in the housing rental industry, which has already been forced to lower rents because of the recession and land price falls, were quick to slam the Kyoto court ruling.

“This case will surely affect our business,” one industry official said.

A spokesman at a Tokyo-based industry group supporting landlords justified the practice, saying renewal fees are part of funds for long-term repair of properties.