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This time, we'll explain the termination and renewal of real estate lease contracts in Japan! Understanding termination and renewal is crucial because mistiming can lead to significant complications! 


**Termination**

When terminating a lease contract, both the tenant and the landlord must follow certain procedures. Typically, the termination process involves the following steps:

1. **Notice of Termination**: The tenant must notify the landlord of their intention to terminate the lease within a certain period. Usually, this requires giving notice one or two months in advance, in accordance with the terms stated in the contract. Misjudging the timing of this notice can result in unexpected additional costs! We'll discuss this in detail later!

2. **Move-out Inspection**: On the termination date, the landlord and tenant conduct a move-out inspection to assess the condition of the property. If there are any areas requiring repairs, the tenant may be responsible for covering the costs.

3. **Settlement**: After termination, the tenant must settle any outstanding repair costs or unpaid rent. Based on the condition of the property, the landlord deducts agreed-upon repair costs, cleaning fees, and unpaid rent from the security deposit and refunds any remaining balance. If repair costs exceed the security deposit, the tenant may be required to pay additional expenses to the landlord.


**Renewal**.

When the end of the original contract is approaching, the landlord or management company will send a notice to the resident regarding whether or not the contract will be renewed. In Japan, in the case of a standard lease contract, the resident usually has the right to choose. If the tenant wishes to renew the contract, he/she only needs to indicate his/her intention to do so.

On the other hand, if a lease contract is concluded under a form of contract known as a fixed-term lease contract, care must be taken! In the case of a fixed-term lease, the concept of renewal does not exist! The tenant must move out at the end of the lease term. If you want to continue to live in the same property, you must re-sign a new lease contract with the landlord before the end of the lease period. When you re-sign the contract, the rent may increase, so you may not be able to rent the property under the same conditions as before.

When looking for a property, it is also important to know whether the contract is for a regular lease or a fixed-term lease.

1. **Application for Renewal**: The tenant must inform the owner of his/her intention to renew the lease before the end of the contract period. Usually, one to two months before the end of the term, the management company will send a renewal notice.

2. **Contract Renewal**: Once new contract terms are agreed upon, the tenant and owner renew the contract. During the renewal process, rent reviews and the cost of repairs may be discussed. However, in the case of a standard lease contract, the contract can usually be renewed under the same terms as before, as long as the renewal fee described below is paid. Renewal is possible even without responding to the lessor's request for an increase in rent. In Japan, the rights of the tenant are strictly protected by law, and the landlord cannot easily raise the rent.

3.**Renewal Fee**: A fee may be charged for renewing a contract. This fee is collected to cover the hassle and expense of processing a new contract. In some areas of Japan, there is a business practice of not charging a renewal fee, but in Tokyo, most contracts are signed with a renewal fee.

For lessees who have concluded a contract that requires a renewal fee at the time of renewal, the timing of termination is very important! This is because if you are planning to move out and move in at the same time the term ends, you may be charged a renewal fee if you do not comply with the cancellation notice period stipulated in the contract. For example, let us assume that the end of the contract period is May 31, and the contract stipulates that the notice of termination is to be given two months prior to the end of the contract period. In this case, if the lessee wishes to move out at the end of the lease term, the lessee must give notice of termination to the landlord or management company by March 31. In the case of an ordinary lease contract, the contract does not automatically terminate at the end of the term, but is renewed. Therefore, if the lessee forgets to give notice of termination and gives notice of termination on April 3, the termination date will be June 3, and the contract will be renewed and a renewal fee will be charged!

Have you found that depending on the timing of your cancellation, you may incur unexpected extra costs?

Cancellation and renewal of a rental property in Japan is an important process for both the tenant and the owner. It is important to follow the terms and conditions specified in the contract to ensure a smooth cancellation or renewal.

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