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.