For both tenants who have suddenly received a rent increase notice from a rental property owner and owners considering an adjustment to an appropriate rent level, it is essential to understand the legal basis for rent increase negotiations and the proper way to respond. This article explains why rent increases happen, when they tend to occur, and what actions both sides should take.
Can rent be increased during the lease term? What is the legal basis?
The right to request an increase or decrease in rent is a right recognized under Japan’s Act on Land and Building Leases. It can be exercised when the rent has become unreasonable due to changes such as increases or decreases in taxes, shifts in real estate value, economic changes, or changes in surrounding market rents. A tenant cannot reject it unilaterally, but agreement between both parties is required.
What are the three cases in which a rent increase is recognized?
When the value of the land or building has increased
If fixed asset tax rises due to factors such as redevelopment in the area, the owner may be allowed to reflect the increased costs in the rent. An appropriate response for the tenant is to request supporting documents showing the increase in fixed asset tax.
When the rent is significantly below the surrounding market level
If the rent is too low compared with properties in the same area with similar conditions, that can serve as grounds for an increase. As we also explain in Why rent setting affects the sale price, setting an appropriate rent is directly tied to the owner’s asset value as well.
When inflation has made the rent effectively cheaper
Inflation reduces the real value of money and makes a fixed rent relatively cheaper. Changes in the economic environment are also legally recognized as a valid reason for a rent increase.
When do rent increases happen? Common timing patterns
In general, rent increases often occur at the time of lease renewal, which is commonly every two years, or when ownership changes. However, there is no legal restriction on timing, so even a sudden rent increase notice is legally possible.
Four ways tenants can respond to a rent increase
Ask for the supporting data
Ask for documents such as proof of the fixed asset tax increase and surrounding market rent data that support the proposed increase. If there is no reasonable basis, there may be room to negotiate.
Check the surrounding market yourself
Use rental listing websites to review market rates for comparable properties and verify whether the proposed increase falls within the market range.
Communicate your intention to stay long term
By stating that you “would like to continue living there at the current rent,” an owner who wants to avoid vacancy risk may withdraw the increase.
Negotiate through other costs
It can also be effective to negotiate based on total cost, such as reducing the amount of the increase, phasing in the increase, or lowering the renewal fee.
What happens if negotiations break down?
Even if you cannot agree to the increase, you cannot be forced to move out as long as you continue paying the pre-increase rent without falling into arrears. However, nonpayment of rent can become grounds for eviction, so caution is necessary. If no agreement can ultimately be reached, mediation or court proceedings are available as resolution methods.
Related reading
- Why rent setting affects the sale price | How a monthly difference of 10,000 yen can create 3 million yen in asset value
- What are rent reduction guidelines? The impact of the 2020 Civil Code revision and how owners should respond
- What are the “leasing operations” that determine the success of rental management? Strategies for reducing vacancies and maximizing returns
Frequently Asked Questions (FAQ)
Q. Is there a grace period between a rent increase notice and the actual increase?
There is no clearly defined legal grace period, but in lease renewals it is customary to give notice several months in advance. Even in the case of a sudden notice, the rent cannot be raised unilaterally without agreement.
Q. What should I do if the owner tries to force through the increase?
A unilateral increase without agreement is invalid. You may continue paying the previous rent. If the matter cannot be resolved, consider consulting a real estate professional, a lawyer, or court mediation.
Q. Can both owners and tenants use the right to request an increase or decrease in rent?
Yes. It is a mutual right. Tenants are also legally allowed to request a reduction on the grounds that “the rent has become higher than the market level.”
