Japan's Civil Code Reform on Security Deposits and Restoration: A Landlord's Guide to Articles 621 and 622-2

In Japan, security deposits (shikikin, 敷金) and restoration obligations (genjo-kaifuku, 原状回復) are governed by rules that were reorganized directly into the Civil Code when Japan's revised Civil Code took effect in April 2020, formalizing concepts that Japanese courts and industry practice had already been applying for years. The single most important point for a landlord to grasp is that shikikin (Article 622-2) and genjo-kaifuku (Article 621) are two separate legal systems — conflating them is exactly what causes a move-out settlement explanation to fall apart. Shikikin is a deposit mechanism that secures a tenant's financial obligations, while genjo-kaifuku is the tenant's duty to repair damage; the two rest on different Civil Code articles and must be applied in a specific sequence, not treated as interchangeable.

In residential leasing, even small missteps in a move-out settlement can do outsized damage to a landlord's reputation and to an owner's trust in their property manager. That is why simply memorizing that the Civil Code was revised is not enough — the lease agreement, any special clauses (tokuyaku, 特約), the move-in briefing, photographic records, and the final settlement statement all need to work together as a single operational chain. This article is written as a comprehensive, practical reference: it organizes the legal framework behind shikikin and genjo-kaifuku from a landlord's operational perspective and, because these are Japan-specific legal mechanisms with no exact equivalent in most Western residential leasing systems, it also flags where the Japanese approach diverges from what an English-speaking property investor might expect from a US, UK, or Australian tenancy.

Key points in this article

• The 2020 Civil Code revision wrote the definition of the security deposit and the conditions for its return (Article 622-2), and the scope of the restoration obligation (Article 621), directly into statute.
• Shikikin and genjo-kaifuku are separate systems. Shikikin is a security deposit held against future obligations; genjo-kaifuku is the duty to repair damage. Treating them as one and the same is what causes settlement explanations to break down.
• Normal wear and tear (tsujo sonko, 通常損耗) and deterioration from the simple passage of time (keinen henka, 経年変化) are, in principle, excluded from the tenant's restoration obligation.
• Landlords need to review the lease agreement, special clauses, the move-in briefing, and the move-out settlement statement together as one checklist, not as separate, disconnected documents.
• Security deposit settlements are now judged not only on whether a charge can be billed, but on whether the landlord can show the tenant the underlying basis for it with transparency.

How the Civil Code revision changed shikikin and genjo-kaifuku (effective April 2020)

The Civil Code revision did not rewrite the whole of Japanese rental practice. What actually changed is that ideas about security deposits and restoration obligations — previously worked out through case law and Ministry of Land, Infrastructure, Transport and Tourism (MLIT, 国土交通省) guidelines — were given clear textual grounding in the Civil Code itself. Japan's revised Civil Code took effect on April 1, 2020, giving shikikin an explicit statutory basis in Article 622-2 and genjo-kaifuku one in Article 621. This shikikin-and-genjo-kaifuku framework is itself a distinctly Japanese institution: it has no exact one-to-one equivalent in typical US or UK residential tenancies, where a single security-deposit clause in a lease — rather than two dedicated Civil Code articles — usually covers both unpaid rent and property damage together.

On the ground, property managers had already been operating this way before the revision took effect: treating normal wear and tear as something that should not, in principle, be charged to the tenant, and returning the shikikin after deducting unpaid rent and restoration costs. The Civil Code revision is less a brand-new rulebook and more a codification that made previously ambiguous practice easier to justify in legal terms.

For landlords, the practical implication is that the excuse "we've always done it this way" no longer holds up at move-out settlement. When a tenant asks for the legal basis of a charge, the landlord needs to be able to point to the specific article and back it up with the lease agreement, move-in confirmation records, move-out photographs, repair estimates, and a settlement statement. If anything, this revision makes life easier for landlords who already manage transparently — it simply gives them a clearer legal vocabulary for what they were doing anyway.

The most common early mistake is treating shikikin and genjo-kaifuku as a single topic. The next section separates the two at the level of the actual statutory text.

Do not conflate the security deposit (Article 622-2) with restoration (Article 621)

To state the conclusion up front: shikikin and genjo-kaifuku are separate systems with different purposes and different statutory bases. Shikikin is a money-holding mechanism that secures the tenant's obligations; genjo-kaifuku is the tenant's duty to repair damage. In a move-out settlement, the correct sequence is to first determine the scope of the restoration obligation, then deduct the resulting liability — together with any other outstanding debts — from the shikikin. Get this sequence backwards, and the whole explanation loses credibility instantly.

What is shikikin (Article 622-2)?

Shikikin is, regardless of what it is called on paper, money that a tenant hands to a landlord to secure the tenant's monetary obligations arising from the lease — rent and anything else the lease generates. Article 622-2 puts this nature of the deposit into explicit statutory language. The key point is that shikikin behaves much like money held in trust: it is not simply the landlord's to keep. For a US or UK reader, the closest equivalent is a security deposit, but the Japanese system differs in one important way: shikikin sits alongside reikin (礼金, a separate, non-refundable "key money" payment some Japanese landlords also charge at move-in), so a Japanese lease can involve two conceptually distinct up-front payments where a Western lease usually has only one.

The conditions for returning shikikin are also now spelled out in statute. The landlord must return the shikikin, less any of the tenant's monetary obligations, once the lease has ended and the property has been handed back. A second trigger for return is set out too: when the tenant lawfully transfers the leasehold to someone else. The landlord is also permitted to apply the shikikin toward a tenant's unpaid obligations if the tenant fails to perform them.

In practice, the important discipline is never to treat shikikin as money the landlord is automatically entitled to keep. Deductible items can include unpaid rent, unpaid common-area fees, and restoration costs properly attributable to the tenant — but every one of these must be something the landlord can justify with evidence and an itemized statement. Even as zero-deposit (shikikin-zero) properties become more common, cutting this corner is what destroys tenant trust at move-out.

What is genjo-kaifuku (Article 621)?

Genjo-kaifuku means restoring a rented property, to the extent required by the lease and by law, to something like its original condition. Article 621 makes the tenant liable for damage that occurs after the tenant takes possession, while explicitly excluding from that liability both normal wear from ordinary use and deterioration from the simple passage of time. It further states that a tenant owes no restoration duty at all for damage caused by circumstances not attributable to the tenant.

In other words, genjo-kaifuku does not mean returning the unit to exactly the condition it was in on day one. Sun-faded wallpaper, minor dents in flooring from furniture placement, and the natural aging of fixtures can all be treated as normal wear and tear or ordinary deterioration. Tobacco staining, pet damage, mold from neglected cleaning, and unauthorized holes from DIY work, on the other hand, can properly be billed to the tenant.

This is the single most misunderstood point in move-out settlements. Genjo-kaifuku is a duty to repair damage — it is not a duty to hand the unit back looking brand new. Trying to explain this distinction for the first time at the move-out walkthrough rarely persuades anyone; the groundwork needs to be laid much earlier, at move-in. This is also a meaningfully different standard from many US "normal wear and tear" clauses, which use similar language but are interpreted with far less codified detail than Japan's Article 621 now provides — in Japan, tenants and landlords increasingly point directly to the statute itself, not just to a lease clause.

Putting the two systems side by side

Summarized in a form a landlord can actually use when explaining the difference, shikikin and genjo-kaifuku look like this. Keeping this table as shared internal vocabulary keeps settlement conversations stable.

Comparison point	Shikikin (security deposit)	Genjo-kaifuku (restoration)
Statutory basis	Civil Code Article 622-2	Civil Code Article 621
Nature of the system	A deposit securing the tenant's obligations	The tenant's duty to repair damage
What it means for the landlord	Funds returned once obligations are cleared	A judgment that fixes the scope of liability
Normal wear and ordinary deterioration	Judged by whether there is an "obligation" to deduct	Excluded from the duty, in principle
Sequence at move-out	Deducted after restoration and other obligations are fixed	Scope of liability is fixed first

It helps to think of shikikin as the money container and genjo-kaifuku as the content of the obligation: the tenant's liability, once fixed through the genjo-kaifuku analysis, is what gets deducted from the shikikin container. Keep that relationship straight, and the settlement explanation holds together logically. If you are unsure how to distinguish similar-sounding Japanese restoration terms, our companion article, Genjo-fukki vs. Genjo-kaifuku vs. Look-Alike "Restoration to Current Condition": What's the Difference? A Practical Usage Guide for Property Managers, sets out the definitions in detail. This article stays focused on the legal framework.

How should normal wear, ordinary deterioration, and tenant liability be separated?

Drawing the line between normal wear and tenant liability by looking only at the move-out condition is a recipe for disputes. It needs to be checked against the move-in condition, the lease terms, how the unit was used, and the cause of the damage, all together. In property management practice, it helps to sort cases into four categories.

Category	Example	General rule
Normal wear and tear (tsujo sonko)	Minor dents from furniture placement, discoloration from sunlight	Usually the landlord's cost to bear
Ordinary deterioration (keinen henka)	Fixtures reaching the end of their expected service life, natural fading	Usually the landlord's cost to bear
Intentional acts or negligence	Holes from impact, staining from inadequate cleaning	Can be billed to the tenant
Breach of the duty of care (zenkan chui gimu)	Leaving a water leak unaddressed, severe mold from poor ventilation	Can be billed to the tenant

This classification lines up with the approach MLIT (the Ministry of Land, Infrastructure, Transport and Tourism, 国土交通省) takes in its guidelines on restoration-related disputes. The guidelines themselves are not legally binding, but their underlying principle — that normal wear and ordinary deterioration should not be pushed onto the tenant — points in the same direction as the text of Article 621. That is exactly why this should not be explained to the tenant for the first time at the move-out walkthrough: communicate the principle at lease signing, take photographs at move-in, and sort out causation at move-out, well before money is discussed.

Breach of the duty of care is closely tied to how restoration liability gets decided, because leaving a water leak or mold unaddressed can count as damage that exceeds ordinary use and can therefore be billed to the tenant. Our companion article, What Is a Tenant's Duty of Care? Violations, Restoration Obligations, and How Property Managers Should Respond, goes deeper into the duty of care itself. Billing for restoration is not just a matter of a repair estimate — it is also a matter of how well the landlord can narrate the tenant's actual use of the unit.

A lease-agreement checklist for landlords to revisit

Landlords operating under the revised Civil Code should not simply keep reusing an old lease template — they need to check how the lease describes the security deposit, restoration, and settlement. A lease is not only a document that protects the landlord after a dispute arises; it is a tool for aligning expectations with the tenant from day one.

At minimum, a lease should be checked for the following:

• The definition of shikikin, together with the timing of its return and what can be deducted from it (restoration costs, unpaid amounts, and so on), is clearly stated.
• The scope of genjo-kaifuku is written in a way that distinguishes it from normal wear and ordinary deterioration.
• Shikikin (Article 622-2) and genjo-kaifuku (Article 621) are organized as separate clauses rather than folded together.
• The settlement method at move-out, and the process for presenting an itemized statement, are described.
• The move-in checklist and photographic records are explicitly tied to the relevant clauses.
• For zero-deposit (shikikin-zero) properties, the lease specifies how the tenant's share of move-out costs will actually be billed.

The most trusted landlords are the ones who invest the most care in explaining things at the very start of the tenancy, not the ones with the most clauses. Prioritize wording the tenant can actually read and understand over simply adding more clauses. If you are considering a review of your management company or your lease template, INA's rental management consultation is available for that purpose as well.

How far can a special clause (tokuyaku) go? Practical points for revising one

A special clause (tokuyaku, 特約) is not automatically valid just because it is written down. Under the reasoning in a Supreme Court decision (December 16, 2005), one requirement for a tokuyaku's validity is that there needs to be an objective, reasonable justification for including it — one that is not exploitative and does not place the tenant at a one-sided disadvantage. When a clause asks a tenant to shoulder a heavier burden than the statutory default, the content needs to be specific, and the tenant needs to actually understand and agree to it. Simply writing something vague like "the tenant bears the full cost of move-out cleaning" leaves room for a later dispute. Special clauses that push even ordinary wear and tear onto the tenant across the board deserve particular caution. This judicial standard has a rough parallel in the way many US courts scrutinize unconscionable or adhesive lease terms, but Japan's framework ties the analysis explicitly to the genjo-kaifuku statute — a tokuyaku that contradicts Article 621's normal-wear exclusion stays vulnerable even if the tenant signed it.

Sorting tokuyaku wording into two columns makes it easier to use day to day. Leading with the conditions and the justification for a charge, rather than pushing through with forceful language, tends to bring settlements to a faster, cleaner close.

Wording to avoid	Wording to use instead
The tenant bears all move-out costs.	Except for normal wear and ordinary deterioration, damage caused by the tenant's intentional acts or negligence may be billed to the tenant.
The full cost of restoration will be deducted from the deposit.	Costs will be deducted from the shikikin only after the work items, the allocation of responsibility, and the basis for each charge are shown in an itemized statement.
Cleaning fees will always be charged.	The scope agreed in the lease and the work actually performed will be confirmed and recorded in the itemized statement.
If a pet was kept, the full amount will be charged.	Charges are sorted out only after confirming damage beyond ordinary use, such as pet odor or scratches.

Checklist items for revisiting a tokuyaku are as follows:

• What the tenant is liable for is clearly distinguished from normal wear and ordinary deterioration.
• The amount, or the method for calculating it, is specific enough that the tenant can reasonably anticipate it in advance.
• The clause was explained verbally at lease signing, and the tenant's understanding and agreement were confirmed.
• The clause avoids catch-all wording — such as "in full" or "without exception" — that provides no actual justification.

Even a small change in wording changes how a tenant receives it. Remember that a tokuyaku is simultaneously a shield that protects the landlord and, if it overreaches, something that erodes the landlord's own credibility.

A move-in briefing checklist for landlords

The quality of a move-out settlement is, in practice, largely determined at move-in. What gets explained and what gets documented at move-in shapes how persuasive the landlord can be later, at move-out. Skip this step, and even a perfectly legitimate charge tends to be met with "nobody told me that."

At move-in, landlords and property managers should have the following in place:

• Interior photographs are taken before move-in, documenting any existing scuffs or stains.
• A move-in checklist is used to confirm the unit's condition together with the tenant.
• The landlord explains the underlying approach to restoration — specifically, that normal wear and tear will not be billed to the tenant.
• The landlord explains the nature of shikikin and what may be deducted from it at move-out.
• The content of any special clauses and the conditions for tenant liability are shown at the relevant point in the lease.
• The tenant is given a contact point for reporting equipment problems, along with an explanation that leaving an issue unaddressed can itself amount to a breach of the duty of care.

At one property we manage, interior photographs were not taken at move-in, so at move-out there was no way to determine whether wallpaper staining had predated the tenancy — and the charge had to be dropped. A single photograph is often the difference between being able to justify tens of thousands of yen in charges and not being able to justify anything at all. It sounds mundane, but move-in documentation is the single highest-return preventive measure available to a landlord.

How to build a move-out settlement statement and assemble supporting evidence

In a move-out settlement, an itemized statement that lists only amounts breeds distrust. What a tenant wants to know is not just what something cost, but why it is their responsibility to pay for it. A settlement statement should present the amount, the allocation of responsibility, and the reason for that allocation together, as a single unit.

Item	Amount	Responsibility	Explanation
Partial re-papering of living-room wallpaper	18,000 yen (approx. $116 at 155 JPY/USD)	Tenant	Tobacco staining confirmed that was not present in the move-in photographs
Minor furniture indentation in flooring	0 yen	Landlord	Minor dent from ordinary use
Move-out cleaning	22,000 yen (approx. $142 at 155 JPY/USD)	Tenant, per lease special clause	A flat cleaning fee was explained at lease signing
Natural equipment failure	0 yen	Landlord	Replacement due to ordinary deterioration

Formatting the statement this way lets the tenant confirm the reason for each charge, while letting the landlord clearly show which items are not being billed — which helps avoid the appearance of over-billing. Checklist items for building a settlement statement:

• The deposit amount, unpaid amounts, tenant-borne amount, and refund amount are all visible at a glance.
• Each line item carries both a responsibility category (landlord or tenant) and a reason.
• Work items, quantities, and unit prices are broken out separately, rather than collapsed into a single lump-sum line.
• Each line item corresponds to move-in photographs or the move-out walkthrough record.

What supports this settlement statement is the evidence used to justify tenant liability. The mere fact that damage exists is not enough — the landlord needs to connect the move-in condition, the cause of the damage, its relationship to neglect or how the unit was used, and the reasonableness of the estimated cost into one coherent account. At minimum, a property manager should assemble the following:

Evidence	When it is used	Risk if missing
Move-in photographs	Comparing against damage found at move-out	Impossible to tell whether the damage pre-dated the tenancy
Lease agreement and special clauses	Confirming the scope of tenant liability	The basis for the charge becomes abstract
Records of contact during the tenancy	Confirming whether a leak, mold, or equipment issue was left unaddressed	Difficult to establish a breach of the duty of care
Move-out walkthrough record	Documenting the damage location and the tenant's acknowledgment	Easy for the tenant to later claim "nobody explained this to me"
Repair estimate	Showing work items, quantities, and unit prices	A lump-sum ("in full") bill that invites distrust

Evidence is not only for winning an argument with a tenant — it is shared documentation for aligning what the landlord and tenant each understand. Bill only what can be justified, and sort out internally whatever cannot be justified: in practice, that attitude is what reduces disputes. For the actual scope of restoration work, prevailing cost ranges, and how work items get classified, our companion article, What Is Genjo-kaifuku Restoration Work? What Every Rental Property Owner Needs to Know About Scope, Cost, and Avoiding Disputes, covers the construction and cost detail. This article stays focused on the legal framework and the settlement logic.

Zero-deposit properties do not change the restoration rules

Even on a zero-deposit (shikikin-zero) property, the logic of genjo-kaifuku does not disappear. What changes is that there is no shikikin fund to deduct from at move-out, so any tenant-borne cost has to be billed separately. This is exactly where the fact that shikikin (Article 622-2) and genjo-kaifuku (Article 621) are separate systems matters most: the restoration obligation itself survives even where no deposit exists. This is worth flagging for an English-speaking investor, because in many US markets a "no security deposit" listing genuinely limits what a landlord can recover for damage. In Japan, shikikin-zero is a marketing and cash-flow choice about the up-front deposit, not a waiver of the tenant's underlying restoration liability — a nuance that is easy to miss without knowing the Article 621/622-2 split.

Zero-deposit listings have a leasing advantage because they lower a tenant's move-in cost. But because the move-out charge becomes a bill presented after the fact rather than a deduction from money already held, both collection risk and the burden of explanation increase. In exchange for going to zero deposit, a landlord needs to be more rigorous about using a guarantor company, a move-out cleaning special clause, the move-in briefing, and photographic documentation.

The point is not to treat the tenant with suspicion. It is to share the rules from the outset and make clear what could become the tenant's responsibility. Transparency protects both the landlord and the tenant. At INA, we treat rental management not as routine paperwork but as work that compounds long-term trust. A shikikin settlement may look like a matter of dollars and cents, but it is actually where a management company's and an owner's underlying attitude shows through.

A full operational review for landlords after the Civil Code revision

Everything above can be consolidated into a comprehensive checklist a landlord can run through right now. Each individual item looks mundane, but together this preparation is what prevents move-out disputes, negative word of mouth, and prolonged vacancy.

• Shikikin (Article 622-2) and genjo-kaifuku (Article 621) are organized as separate clauses in the lease.
• The lease states the timing of the shikikin's return and what can be deducted from it.
• The genjo-kaifuku special clause is specific and distinguishes normal wear and ordinary deterioration.
• Move-in checklists and interior photographs are retained.
• The approach to restoration and the security deposit is explained to the tenant at move-in.
• The items checked at the move-out walkthrough are standardized.
• The repair estimate and the settlement statement separate landlord-borne and tenant-borne costs, together with the reason for each.
• A collection process for move-out costs on zero-deposit properties has been decided in advance.
• The property manager has language ready that can explain the basis for a charge to the tenant.

In the short term, keeping detailed records and explanations can look like extra work. That is precisely why it is worth building into a system rather than relying on any one person's memory. Building an operation that does not depend on any single individual protects the owner's asset and the tenant's peace of mind at the same time. Handling shikikin and genjo-kaifuku correctly under the revised Civil Code is not a burden for a landlord — it is an opportunity to build trust.

Frequently asked questions (FAQ)

Q1. What is the difference between shikikin and genjo-kaifuku?

A. They are separate systems. Shikikin (Civil Code Article 622-2) is a deposit that secures the tenant's obligations; genjo-kaifuku (Civil Code Article 621) is the tenant's duty to repair damage. In a move-out settlement, the correct order is to first fix the scope of the restoration liability, then deduct that liability — along with any other obligations — from the shikikin.

Q2. Does the Civil Code revision mean a security deposit must always be refunded in full?

A. No. Shikikin is not automatically refunded in full. The landlord returns the balance after deducting unpaid rent and any restoration costs properly attributable to the tenant. However, every deduction needs to be justified with evidence and an itemized statement, and the conditions for return are that the lease has ended and the property has been handed back.

Q3. Can normal wear and ordinary deterioration be billed to the tenant?

A. In principle, no. Normal wear and tear and ordinary deterioration are excluded from the tenant's restoration obligation. Article 621 itself excludes wear from ordinary use and deterioration from the simple passage of time from the scope of genjo-kaifuku. Even where a special clause tries to shift this to the tenant, the content needs to be specific, and the tenant needs to actually understand and agree to it.

Q4. Can restoration costs be billed at all on a zero-deposit property?

A. Yes. Even with no security deposit, restoration costs properly attributable to the tenant can still be billed, because the restoration obligation exists independently of whether a deposit was collected. Because there is no shikikin to deduct from, however, the landlord needs to be more careful with the move-out explanation, the itemized statement, and the collection process.

Citations and references

• e-Gov Japanese Law Search — Civil Code (Minpo, 民法), Articles 621 and 622-2
• Ministry of Land, Infrastructure, Transport and Tourism (MLIT, 国土交通省) — "Disputes and Guidelines Concerning Restoration to Original Condition"
• Ministry of Justice (MOJ, 法務省) — "Review of Rules Concerning Lease Agreements (Restoration and Security Deposits)"