Investing in Japanese Real Estate through Mortgage Property Auctions: What Foreign Investors Need to Know

Investing in Japanese Real Estate: What Foreign Investors Need to Know

Japan is a country with a rich history and culture, and its real estate market is no exception.

With its unique blend of modernity and tradition,

Japan offers a wide range of investment opportunities for foreign investors.

However, investing in Japanese real estate can be a complex process,

and it is important to understand the legal and

cultural nuances before making an investment.

As a real estate agent based in Tokyo serving foreign investors,

I have seen first-hand the potential for growth and success

in the Japanese real estate market.

In this article, I will share some key information t

hat foreign investors should know before investing in Japanese real estate.


Understanding the Legal System

One of the most important things to understand

before investing in Japanese real estate is the legal system.

Japan has a civil law system, which means that the law is primarily

based on written codes and statutes.

This is different from common law systems,

such as those found in the United States and the United Kingdom,

where the law is primarily based on judicial decisions and precedents.

In Japan, there are several laws and regulations that govern real estate transactions.

For example, the Civil Code sets out the basic rules

for contracts, property rights, and other legal matters.

There are also specific laws that regulate real estate transactions,

such as the Building Lots and Buildings Transaction Business Act

and the Real Estate Specified Joint Enterprise Act.

It is important for foreign investors to understand these laws

and regulations before investing in Japanese real estate.

Working with a knowledgeable real estate agent

or attorney can help ensure that your investment is legally sound.


Cultural Differences

In addition to understanding the legal system, it is also important

to be aware of cultural differences when investing in Japanese real estate.

Japan has a unique culture that can impact the way business is conducted.

For example, in Japan, it is common for parties to engage in lengthy negotiations

before reaching an agreement.

This can be different from other countries

where negotiations may be more direct and straightforward.

It is important to be patient and respectful during these negotiations

to build trust and establish a good working relationship.

Another cultural difference to be aware of is the importance of

hierarchy and seniority in Japanese society.

In business dealings, it is important to show respect to

those who are older or more senior than you.

This can include using formal language and bowing when greeting someone.

Case Study: Mortgage Property Auctions

To illustrate some of the complexities of investing in Japanese real estate,

let’s look at a recent case involving a mortgage property auction.

In this case, a real estate company acquired a single-family home at auction

for resale purposes. However,

They discovered that the previous owner had rented out the property

and that the actual occupant was a subtenant who had sublet it without permission.

They demanded immediate eviction from the subtenant,

but they (the occupant) claimed that there was

a six-month grace period for eviction and refused to vacate.

This situation raised several legal questions

about the rights of the purchaser, tenant, and subtenant.


Under Japanese law, if mortgaged real estate subject to lease

is put up for auction, if a lease agreement was concluded before mortgage rights

were established and delivery was received by tenant,

then tenant’s lease rights take precedence over mortgage rights

and tenant can continue to occupy. However,

if tenant acquired lease rights after mortgage rights were established

and has been using or earning income from them before commencement

of auction proceedings, they are protected by six-month grace period

for delivery and do not have to deliver auctioned property to purchaser

(Civil Code Article 395(1)).

In this case, it was determined that no grace period for eviction

was granted to subtenants who had not obtained consent from their landlords (Civil Code Article 612).

As such, the real estate company was able to request eviction from the subtenant.

This case illustrates some of the complexities of investing

in Japanese real estate.


It is important for foreign investors to work

with knowledgeable professionals who can help navigate these complexities.



Investing in Japanese real estate can be a rewarding experience for foreign investors.

However, it is important to understand the legal system and cultural differences

before making an investment.

Working with a knowledgeable real estate agent or attorney can help ensure

that your investment is successful.

I hope this article has provided some useful information

for foreign investors looking to invest in Japanese real estate.

If you have any further questions or would like more information about investing in Japan,

please don’t hesitate to contact us.



Investing in Japanese real estate can be a great opportunity for foreign investors.

However, it is important to understand the legal and cultural nuances before making an investment.

Working with a knowledgeable real estate agent or

attorney can help ensure that your investment is legally sound and culturally appropriate.

If you are a foreign investor looking to invest in Japan,

don’t hesitate to take the first step.

Contact a real estate agent or attorney today to learn

more about the opportunities available to you.

With the right guidance and support,

you can successfully navigate the complexities of the Japanese real estate market

and make a profitable investment.

So why wait? Take action today and start your journey

towards success in the Japanese real estate market!

Source: 抵当不動産を競落した買受人は、無断で入居している転使用借人に対し、競落物件の引渡しを求めることができるか。

Investing in Japan’s Ageing Condominiums: Opportunities and Insights for Foreign Investors Amid Legal Changes


Investing in Japan’s Ageing Condominiums:


Opportunities and Insights for


Foreign Investors Amid Legal Changes



Are you a foreign investor interested


in Japan’s real estate market?




As a leading real estate agent for foreign investors, we’re here to provide you with the latest updates


and insights into the industry.


Today, we’re discussing the Japanese government’s proposed amendments


to the Condominium Ownership Act and what it could mean for you as a potential investor.



The Japanese government is considering amending the Condominium Ownership Act by the fiscal year 2024,

Read more

Redefining Investment Strategies: Why Japan’s Real Estate Market is the Next Big Opportunity for Chinese Investors


Are you an investor exploring alternative

real estate investment opportunities in Asia?



The recent changes in Singapore’s property tax regulations may prompt you to look elsewhere


for promising investments.


As a Japanese real estate agent specializing in assisting foreign investors,


I’m here to help you navigate this changing landscape and


discover the potential of Japan’s real estate market.


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Transforming Akiya(unused house) into a Hotel?: Navigating the Legal Maze for a Successful Investment


Contemplating Purchasing

Akiya and Turning It into a Hotel?

Uncover the Legal Considerations

for Change of Use


If you’re mulling over the idea of buying an Akiya (unused house) in Japan


and converting it into a hotel, it’s crucial to familiarize yourself


with the legal considerations involved in modifying the property’s purpose.


In this blog post, we’ll highlight the primary aspects you need to


keep in mind before diving into this thrilling endeavor.


Stay up-to-date and optimize your investment by following our business


blog for more news and valuable insights.

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Digital Nomads and Investment Opportunities in Japan: A New Era Unfolds


Have you ever considered becoming

a digital nomad in Japan?



As the safest country in the world, Japan offers a diverse range


of entertainment options,


an unrivalled food scene and a unique blend of tradition and innovation.


With relatively affordable rent and a world-class healthcare system,


Japan is an increasingly attractive destination for digital nomads looking to


immerse themselves in a new culture and way of life.


Moreover, the Japanese government is actively encouraging



digital nomads and foreign investors

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Japan’s Skilled Worker Shortage: How the Proposed Changes to Immigration Policy Affect the Real Estate Market (Breaking News)



Will permanent residency be

given to foreign workers?



As a real estate agent in Japan targeting foreign investors,


it’s important to keep up-to-date on the latest changes to immigration policy.


On April 24th, the Japanese government proposed a significant expansion of


the “Specified Skilled Worker 2” residency status, which allows skilled foreign workers to work in Japan.


If approved, this would allow for unlimited employment of foreign workers in 12 sectors facing labor shortages.

Read more

Navigating Withholding Obligations for Foreign Investors: A Comprehensive Guide for Buyers and Landlords


Tax implications: When a non-resident sells

or rents out real estate in Japan




(Case study)


In Japan, taxes are levied on residents (referred to as “residents”) regardless of nationality.


In this case, the income subject to taxation includes not only income generated within Japan


but also income from around the world.

Read more

Japanese real estate essentials: What kinds of taxes are imposed on real estate in Japan? 

Tax matters.

In fact, the most expensive item in our life is not ‘real estate’ but ‘our government’.

And the government is the tax.

So what kinds of taxes are imposed on real estate in Japan? 

Real estate-related taxis include personal income tax, corporate tax, fixed-asset tax, city planning tax, real estate acquisition tax, registration tax, stamp duty, and consumption tax 


Personal income tax related to real estate is the tax on individuals who gain rental income or capital gain through the sales of real estate.

Corporate tax is a tax on companies that have taxable income. Therefore, their real estate rental income and any profit from a real estate sale have an impact on their total taxable income level.

The corporate tax rate in Japan is currently about 37% (as of July 2019) so if you have a very profitable property, it is wise to hold the title under a corporate name rather than an individual name.

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Japanese Real Estate Essentials: City Planning Law for the residential districts.

The city planning law, which was created by the ministry of land, infrastructure, transport and tourism, exist to regulate urban development.

The law divides all Japan into mainly two parts; city planning area which is regulated by the city planning law and the non-city planning area which is not regulated by this law.

The law defines 12 zoning districts within urbanization promotion areas.

Of these zoning districts, three have a primary effect on real estate projects residential district, commercial districts and industrial district.

Specific regulations for each district such as allowable use, building coverage ratio and floor area ratio are defined by the building standards law.

When you buy a property in Japan, it is very important to know which district your property exists.

Because each district is highly regulated by the specifics of city planning law(and building standards law)

and such regulations always affect the neighbourhood.

The law regulates the hight, allowable use, building coverage ratio, floor area ratio, type of the business and the size of the business and so on.

For example, you can not open a restaurant in category 1 low-rise exclusive residential districts.

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Japanese real estate essentials: What is the Building Standards Law?

What is the purpose of the mission of the Building Standards Law?

The Building Standards Law (建築基準法)was created for the MLIT to provide basic rules for construction during a building and the stipulates minimum engineering safety requirements concerning fire earthquake and other natural disasters.

It also stipulates the types of buildings we can build according to each zoning district(用途地域)

under the city planning law.

A building not contracted to meet this requirement is regarded as an illegal building however a building previously constructed in compliance with a standard existing at the time of the construction but which no longer meet current construction standards is not considered as an illegal building but rather called non-conforming building. (既存不適格)


When you find the cheap property, please make sure if it is a non-conforming building or not. It is not a fatal mistake to buy such a property, but you have to understand what you are running into beforehand. 

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