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1. Can a foreigner purchase property in Japan?

YES.  Foreigners of any nationality,  any country can buy real estate in Japan, even if they do not have a “permanent resident” status. Relative to other countries, it is relatively easy for a foreigner to buy property in Japan.  The only thing provision is that you must secure your own financing. But before taking the plunge, first consider how much you can afford.  Please remember that in addition to the price of the property itself, you will need to account for miscellaneous costs such as realtor commissions and registration costs.

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2. How is title registered in Japan?

The parties file an application for registration at the Legal Affairs Bureau (LAB), to register the title under the name of the new owner. A registration and license tax is then paid at the LAB at 2% of building value plus 1.5 % of land value. As registration is a requirement for perfection vis-à-vis third parties, reviewing the certified copy of the real property registry is generally sufficient for identifying any existing perfected encumbrances over the real property. The parties may apply for registration by themselves, but due to the complexity of filing, a judicial scribe is usually appointed for registration. An 8% consumption tax is levied in Japan. Sales or leases of land are exempted. However, if the transaction includes the sale or lease of buildings, consumption tax will apply only to the building price.

The documentation includes:

  • Executed original copy of the purchase and sale agreement (alternately a copy of registration application signed by the seller and the buyer)
  • “Certificate of registration of seller’s title of the real property (toukizumi kenri sho) or registration identification code (touki shikibetsu joho) (Already in his possesion)”
  • Certificate of corporate registry of the parties (if any of them is a corporation) (obtained in Procedure 1)
  • Certificate of the parties’ seal impression
  • Certificate of evaluation for fixed asset tax of the real property
  • Power of attorney of the seller (if a judicial scribe applies for the registration on behalf of any of the parties)

In regards to inheritance however, all the heirs are deemed to own the real estate in common to each of them. In order to have the real property belong to a particular heir, and change the registry of the real estate to indicate the heir’s ownership, there must be a valid will or an agreement between all the heirs.

 

3. If I buy an apartment in a large building, what am I actually buying?

Under Japanese law, the building and the land it’s built on are treated independently. Therefore, the owner of the land and the owner of a building on the land could be different entities. However, in the case of a large apartment building, each owner of a unit usually owns a pro rata share of the land on which the building sits.

 

4. What is the role of agents and what is the standard commission rate?

Japanese law requires that a registered real estate agent act as an intermediary for a buyer. The agent prepares the statutory documents explaining all important information regarding the property, including the legal title and the status of the property. Commissions are paid by both buyer and seller. Currently, the maximum statutory rate is approximately 3% of the sales price plus consumption tax at 8%.

 

5. What happens during the Buying process?

1.  Submit an Application to Purchase. This is a non-legally binding written expression of your interest to buy. The purchase application form includes:

  • Your Offer Price
  • Payment method
  • Contract date, Date of delivery
  • Others (requests)

2.  A Sales Contract will be prepared by the Real Estate company, after your negotiation and seller acceptance.

3.  Sign the Sales Contract.  You will need a registered seal for the signing procedure. Pay a Deposit (usually 10-20%) + Stamp Duty.

4.  Closing and Transfer. A Judicial Scrivener will administer property rights preservation and ownership transfer registration matters. What you pay at this stage:

  • the balance 80-90% due
  • Various taxes (Stamp Duty, Registration and License tax, Real Estate Acquisition Tax, Fixed Asset Tax, City Planning Tax)
  • Legal Scrivener fee
  • Real estate agent commission (3.15 percent of the purchase amount plus 63,000 yen)

 

6. What are the documentary requirements (notarization, power of attorney, certificates, etc.)?

All official documents must be signed with a registered seal. A seal registration certificate is necessary for filing official registrations. For foreigners residing outside of Japan, you must obtain a notarised signature certificate. The real estate company you are dealing with should be arranging the necessary representation for you by proxy, under a power of attorney.

 

7. What is the role of the legal scrivener?

A legal scrivener checks and prepares the necessary documents for title registration and files the actual registration with the LAB.

 

 

8. Tax Notes

  • Registration taxes are imposed on both the value of the land and the value of the building on that land. This “value” is not the actual sales price, but an assessed value calculated by the local government in order to assess the property maintenance tax.
  • Real Estate Acquisition Tax is also payable. There are a number of tax exemptions available for residential houses and apartments. Stamp duty will be charged on the purchase and sale agreement.

 

 

9. Must I be present physically at the closing?

No, you may appoint your lawyer to close out the transaction under a power of attorney.

 

Related Article: Property Buying Process in Japan


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