Most rental properties in Japan reach a renewal point every one or two years, at which the landlord asks the tenant for a "renewal fee" (koshin-ryo). This is a distinctly Japanese practice with no real counterpart in the United States or the United Kingdom, where a lease simply rolls over or gets re-signed without any comparable payment changing hands. The renewal fee is an important source of income for landlords in Japan, but it is also a frequent source of friction with tenants. This article explains in detail how the renewal fee works, how the renewal process itself proceeds, what to do if a tenant refuses to pay, and the kinds of disputes that can arise at renewal time.
What Is the Renewal Fee in a Japanese Lease?
The renewal fee is a payment charged to a tenant who chooses to renew the lease and continue living in the unit. Japan's Supreme Court has held that a renewal fee is not unfair as long as the amount is not excessive. There is no equivalent charge built into a standard American or British tenancy; a US lease renewal typically just means signing a new term at a possibly adjusted rent, and a UK tenancy usually either rolls onto a periodic (month-to-month) basis or gets a new fixed term, again without a separate renewal payment. For a tenant moving from either market, encountering a dedicated fee simply for continuing to rent the same apartment can be genuinely surprising.
The Difference Between an Ordinary Lease and a Fixed-Term Lease
Japanese residential leases come in two forms: the "ordinary lease" (futsu shakuya) and the "fixed-term lease" (teiki shakuya).
- Ordinary lease: Can be renewed, must run at least one year, and the tenant may terminate early
- Fixed-term lease: Cannot be renewed, the term is set freely, and a new lease can only be signed if both parties agree
The great majority of rental units in Japan use the ordinary lease, meaning renewal is possible. This is roughly analogous to the distinction between a standard renewable US lease and a strict fixed-term UK assured shorthold tenancy that simply expires, though neither Western equivalent carries a renewal fee attached to it.
Typical Renewal Fee Amounts
The renewal fee varies by region. Tokyo, Kanagawa, Chiba, Saitama, and Kyoto tend to have the highest fees, typically at least half a month's rent. In the greater Kansai region (excluding Kyoto) and in Kyushu, some areas charge no renewal fee at all. When a management company handles the lease, the landlord's share of the fee is typically around 50 percent, with the rest going to the management company. Because there is no direct Western equivalent, it can help to think of the renewal fee as functioning a little like a second, smaller round of the move-in fees a US or UK tenant already recognizes, except that it recurs at every renewal rather than being a one-time cost at move-in.
Three Types of Lease Renewal
- Automatic renewal: The lease renews automatically the moment the term expires. Prior agreement to this arrangement is required, but no paperwork needs to be filed at the time.
- Renewal by agreement: The lease is renewed with both parties' consent, and the terms of the lease can also be freely changed at this point.
- Statutory renewal: This applies when the term expires without either side having taken any renewal action. To protect the tenant, the lease renews automatically on the same terms, but it becomes a lease with no fixed end date.
How Does the Lease Renewal Process Work?
The basic flow is to notify the tenant one to three months before the term expires and confirm whether they intend to renew.
The Renewal Flow
The landlord or the management company sends the tenant a renewal notice; once the tenant agrees to the terms, they sign the renewal agreement and pay the renewal fee and any administrative fee, completing the process.
Documents Needed
If the landlord is self-managing the property, prepare the renewal agreement early enough to send the notice at least one month before the term ends. Even when a management company handles the process, it is worth checking in on progress to be safe.
Other Contracts That Need Renewing at the Same Time
Fire insurance and guarantor company contracts are also often written on two-year terms, so use the lease renewal as an occasion to confirm these as well. Lapsed fire insurance leaves the landlord badly exposed if something goes wrong. American and British landlords carry similar exposure through landlord insurance or buildings insurance, which is one more reason the renewal date is a convenient moment to check that every related policy is still in force, not just the lease itself.
Can a Tenant Refuse to Pay the Renewal Fee?
If the lease document specifies a renewal fee, the tenant is obligated to pay it and cannot, in principle, refuse. Japan's Supreme Court has also held that a renewal fee of up to two or three months' rent is not considered excessive.
What the Lease Document Says Matters
If the lease contains no mention of a renewal fee and there is no other evidence of an agreement to pay one, a tenant may be able to refuse on the grounds that there is no basis for the charge. Legally speaking, a renewal fee exists only because the parties agreed to it. It is also worth noting that an excessively high renewal fee can be voided under Japan's Consumer Contract Act. A US or UK reader can think of this consumer-protection backstop as playing a role similar to unconscionability doctrine or unfair-terms regulations in their own market: an agreed fee is generally enforceable, but not if it is so lopsided that the law refuses to recognize it.
What Should a Landlord Do If a Tenant Refuses to Pay the Renewal Fee?
Whether nonpayment of the renewal fee justifies terminating the lease depends on whether the failure to pay has broken down the relationship of trust between landlord and tenant.
Whether Termination Is Justified
Failing to pay a renewal fee equal to one month's rent often does not, by itself, justify terminating the lease, but failing to pay an amount equal to three months' rent tends to be treated as sufficient grounds. There have been cases where two missed renewal-fee payments were enough to justify termination. This standard, a serious enough breach to destroy the underlying relationship of trust, closely tracks how US and UK courts think about lease forfeiture and eviction for breach: a single missed or disputed charge rarely ends a tenancy on its own, but a pattern of nonpayment usually does.
The Option of Legal Action
If a tenant continues to refuse payment, filing a lawsuit is also an option. A lease is fundamentally built on trust between the parties, and nonpayment is treated as an act that breaks that trust. Depending on the tenant's conduct, termination may be upheld even where the unpaid amount falls short of three months' rent.
What If a Tenant Asks for a Lower Renewal Fee or to Pay in Installments?
If the lease already specifies the fee and the tenant has already agreed to it, the landlord is under no obligation to grant a discount or an installment plan. That said, a degree of flexibility depending on the circumstances is not unreasonable.
Before the Lease Is Signed
Before signing, a landlord concerned about vacancy risk might reasonably choose to lower the renewal fee somewhat or agree to installments.
After the Lease Is Signed
Once the terms have already been agreed, the landlord generally has no obligation to accommodate such a request. Still, taking a tenant's financial circumstances into account and responding flexibly remains one option among others.
What Other Disputes Can Arise at Renewal Time?
Beyond the renewal fee itself, disputes can also arise over administrative fees, the wording of the lease, rent increases, and changes of management company.
- Administrative fee: When there is no renewal fee, the tenant may still be required to cover an administrative fee owed to the management company.
- The lease document: Collecting a charge that is not written into the lease is difficult. Confirm the contents of the lease together with the tenant ahead of time.
- Rent increases: Raising the rent is legally permitted, but it requires the tenant's agreement, and it is often carried out at the point of renewal.
- Change of management company: Sometimes the renewal fee is changed in an arrangement directly between the tenant and the management company, without the landlord's involvement, so when the management company changes, check the terms of the contract carefully.
When Can a Landlord Refuse to Renew a Lease?
A landlord can refuse to renew a lease if there is a legitimate reason for doing so.
- Breach of contract: Cases such as noise complaints, foul odors, or unpaid rent, where the violation of the lease's rules is recognized as having destroyed the relationship of trust
- Payment of relocation compensation: Where the landlord wants the tenant to move out for the landlord's own reasons and pays sufficient compensation for the move
- Deterioration of the building: Where renovation or rebuilding is necessary because of aging or disaster damage
- Unavoidable circumstances: Such as the landlord's own need to occupy the unit, or a serious downturn in the landlord's financial situation
US and UK landlords face a similarly narrow set of legitimate grounds when they want to end a periodic tenancy or decline to renew, whether framed as "just cause" eviction rules, a formal Section 21 or Section 8 notice in England and Wales, or a landlord's own-use exception. The specific legal mechanics differ sharply from Japan's framework, but the underlying principle, that a landlord generally needs a recognized, legitimate reason rather than simple preference, is one both systems share to varying degrees.
How Should a Landlord Guard Against Rental Disputes in General?
Thorough tenant screening, a well-drafted lease, and access to legal counsel are the most effective ways to prevent disputes.
- Screen tenants thoroughly: Consider character, income, occupation, and family situation, and try to select tenants unlikely to cause problems.
- Check what the lease says: If you do not want a renewal fee challenge later, spelling it out clearly in the lease is an absolute requirement.
- Explain how disputes will be handled: At signing, walk the tenant through the rules, prohibited conduct, and the consequences of violating them in detail.
- Build a relationship with a lawyer: Maintain a relationship with counsel so that you can respond quickly if a dispute does arise.
For the broader legal side of rental management, see our guide to rental management regulations in Japan. For tips on streamlining management operations, our article on building a stress-free rental management system is also worth a look.
Frequently Asked Questions (FAQ)
Q. If a tenant refuses to pay the renewal fee, can the landlord terminate the lease right away?
Immediate termination is usually difficult. The deciding factor is whether the relationship of trust has been broken, and nonpayment equal to one month's rent tends not to be enough on its own to justify termination. An amount closer to three months' rent is generally treated as the benchmark.
Q. What is the typical renewal fee amount?
In Tokyo, Kanagawa, Chiba, Saitama, and Kyoto, at least half a month's rent is common. In the greater Kansai region (excluding Kyoto) and in Kyushu, some areas have no renewal fee at all.
Q. Can a landlord charge a renewal fee if statutory renewal applies?
Under statutory renewal, charging a fee is difficult unless the lease clearly specifies a renewal fee for that situation. It is important to complete the renewal-by-agreement process ahead of time to avoid this outcome.
Q. Under what circumstances can a landlord refuse to renew a lease?
Legitimate grounds include breach of contract (such as unpaid rent or noise complaints), payment of sufficient relocation compensation, the need for renovation or rebuilding because of aging or disaster damage, or unavoidable circumstances on the landlord's side.
Q. What happens if the renewal process is simply forgotten?
Statutory renewal applies, and the lease continues automatically on the same terms as before. Note, however, that the lease term itself changes to "no fixed end date," which requires some care going forward.
