Due diligence
Freehold vs Leasehold in Tokyo: What the Land Rights Line Means
The difference between owning the land and leasing it, the three types of Japanese leasehold, ground rent and consent fees, and the effect on loans and resale.
Tokyo listings state the land rights as freehold (所有権) or leasehold (借地権). Leasehold properties are often cheaper, but they come with ground rent and the landowner's consent for selling or rebuilding, conditions that freehold does not have.
Key takeaways
- Freehold means you own the land too; leasehold means you lease the land your building stands on
- There are old-law, ordinary and fixed-term leaseholds, with different renewal rules
- Ground rent, renewal fees and a consent fee on sale may apply
- Loans are harder to get, and buyers need the terms explained when you sell
Freehold and leasehold
With freehold you own the building and the land (for a condominium, a share of the site). With leasehold you own the building, but you lease the land from the landowner and pay ground rent.
Leasehold properties are often priced below freehold in the same location, and the landowner pays the fixed asset tax on the land.
Types of leasehold
Renewal depends on when the lease was made and under which law.
- Old-law leasehold: leases from before August 1992; strong tenant protection and usually renewed
- Ordinary leasehold: an initial term of 30 years or more; the landowner needs just cause to refuse renewal
- Fixed-term leasehold: for example 50 years or more; no renewal, and the land is normally returned cleared at the end
Costs of leasehold
Besides ground rent, landowners customarily ask for a renewal fee when the lease is renewed, a consent fee when you sell and another when you rebuild. In fixed-term leasehold condominiums, ground rent and a demolition reserve may be added to the monthly fees.
Loans and resale
Leasehold is weaker collateral, so fewer lenders will finance it. When you sell, buyers need the ground rent and consent terms explained, which can narrow the market.
A fixed-term leasehold loses value as the remaining term shortens, so always check how many years are left.
What to check
Before signing, confirm these documents and terms.
- The land lease contract: type, term, years remaining and renewal terms
- Current ground rent and its revision history
- Whether sale, rebuilding or extension needs consent, and the usual fees
- Whether a loan can be used with the landowner's consent
FAQ
Are your listings freehold?
The land rights appear on each listing page. Leasehold properties are flagged under “Points to check”.
Can foreigners buy leasehold property?
Yes. As with freehold there is no nationality restriction, but confirm the landowner's consent conditions in advance.
Can leasehold become freehold later?
If the landowner sells the land, the leaseholder may be able to buy it and become the freehold owner. It depends on negotiation.
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