The term "lessor" appears frequently in real estate lease agreements. Understanding its reading and meaning accurately is indispensable both in property management practice and in customer communication. A lessor refers to the party in a lease agreement that provides the subject property, such as a building or room, to the other party (the landlord or property owner).This article offers a structured explanation of the lessor’s role, three key obligations, the difference from a lessee, and how to begin rental management.
What Does a Lessor Do?
A lessor is the party in a lease agreement that allows the lessee to use the subject property, such as a room, building, or land, and receives rent or usage fees in return.In general, this party is referred to as the "landlord" or "property owner." The term lessor also applies not only to real estate, but also to the lending of movable property such as rental items.
Three Obligations That Arise for a Lessor
A lessor bears three obligations to the lessee under the Civil Code. In property management practice, it is important to understand these obligations accurately when handling resident matters and managing the property.
Obligation to Allow Use and Enjoyment
This is the obligation to provide the leased property in an appropriate condition so that the lessee can live or conduct business there. The lessor must make available not only the exclusive-use portion, but also common areas such as elevators, hallways, and garbage disposal areas.
Repair Obligation
If the leased property is damaged or deteriorates, the lessor has an obligation to repair it so that normal use is not impeded. Because the obligation to repair is accompanied by the right to carry out repairs, if the damage is caused by an external factor, the lessor may proceed with repairs even if the lessee refuses.In condominium management, common areas such as hallways, staircase lighting, and mailboxes are also subject to the repair obligation.
Obligation to Reimburse Expenses
If the lessee incurs expenses related to the property, the lessor becomes obligated to bear those expenses. "Necessary expenses" are essential repair costs, such as fixing a broken window, while "beneficial expenses" are costs that increase the property’s value, such as replacing wallpaper or installing a washlet toilet seat.Under certain conditions, the lessee may claim reimbursement from the lessor for either type.
The Difference Between a Lessor and a Lessee
| Item | Lessor (Landlord) | Lessee (Tenant) |
|---|---|---|
| Position | The party that leases out the property | The party that leases the property |
| Main obligations | Allowing use and enjoyment, repairs, reimbursement of expenses | Payment of rent, restoration to original condition |
| Benefit | Earns rental income | Obtains the right to use the property |
What Kinds of People Serve as Lessors?
Those Who Take It Up as a Full-Time Profession
These are lessors who leave salaried employment and make real estate investment their primary business. Because they can devote time to attentive management, relationships with residents tend to remain stable, making long-term occupancy more likely.
Those Who Take It Up as a Side Business
This is the case of engaging in real estate investment while continuing one’s main occupation. By outsourcing building management to a management company, operations can continue without disrupting one’s primary work.For properties aimed at single occupants, troubles that arise during one’s absence can also be handled after work hours or on holidays.
Four Steps to Start Rental Management
1. Acquire a Property
Consider, in line with your budget, whether to purchase an entire apartment building or condominium, or a single unit. What matters most is to consider from the resident’s perspective whether the layout, orientation, and location make the property easy to live in.Even an expensive property has little meaning if it attracts no tenants.
2. Select a Brokerage Firm and Management Company
Choosing a management company with a proven track record and a strong reputation helps secure quality residents and ensures appropriate property management. Working with a company that has a management framework that leverages technology is effective for stabilizing returns over the long term.
3. Stay Involved in Management Yourself
Rather than leaving everything to the management company, it is recommended that you also take part in tasks such as weeding, cleaning, and inspections for nearby properties. Building a sound relationship with residents as a landlord forms the foundation of stable rental management.
4. File Tax Returns and Prepare Financial Statements
Rental income requires the filing of a final tax return. You will prepare two documents: a blue return financial statement for real estate income and an income and expenditure statement.Withholding tax slips are obtained from your employer, while rent remittance statements and key money funds are obtained from the management company.
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Frequently Asked Questions (FAQ)
Q. What is the difference between a lessor and a landlord?
In essence, they mean the same thing. "Lessor" is the legal term, while "landlord" and "property owner" are everyday expressions.
Q. Does a lessor need to manage the property even when there are no residents?
Yes. Even during vacancy, the property still requires maintenance and management, including cleaning, inspections, and preservation of equipment. Appropriate management helps preserve property value.
Q. How far does a lessor’s repair obligation extend?
As a general rule, any area where normal use is hindered falls within the lessor’s repair obligation. However, damage caused intentionally or negligently by the tenant is borne by the tenant.
Q. If I start as a lessor as a side business, what tax points should I be aware of?
If your annual real estate income exceeds 200,000 yen, you must file a final tax return. By accurately understanding deductible expense items, such as management fees, repair costs, and depreciation, and by using the blue return system, you can improve tax efficiency.
