Did you sign your current rental agreement at the top of the market and wondering whether or not you should move houses at the end of your current contract? Would you be willing to stay where you are if you to didn’t have to pay an entire months rent (or sometimes two) to your landlord to thank them for renewing your contract? Or does it just really irritate you that it’s hard to compare one rental contract due to all of the unwritten customs in Japan? Either way, rental life is getting a little bit closer to being simpler thanks to a man from Kyoto.

The regular guy in Kyoto was living in a typical apartment room paying 55,000 yen a month rent. His rental contract reached maturity in April of 2006 and was automatically rolled over to a new contract when he agreed to pay two months of rent (110,000 yen) as a one off renewal fee ( 更新料 ) to the landlord. Nothing unusual there and I’m assuming that the guy himself didn’t think twice when he paid it. However, it’s funny how stupid some decisions look retrospectively. Due to various reasons the guy had to leave his apartment in the following month (May ’06) and decided that he would ask his landlord to refund the renewal fee and 100% of his deposit. When the landlord said no he took him to court arguing that it was in breach of the 消費者契約法 (shohishakeiyakuho, consumer contract law) and requested a full refund of both. Incidentally, his deposit was more than a whopping 350,000 yen (more than 6 months rent!) and that is probably the real reason why he took his landlord to court but for you and I the more relevant issue is what happened to his renewal fee.

To cut a long story short the Kyoto regional court ruled in his favour and argued that the concept of a renewal fee had no benefit whatsoever to the consumer and was completely in favour of the owner and hence in breach of the consumer contract law. While there have been various one off court cases concerning particular cases of a renewal fee, this is the first in which the entire concept was deemed to be against the spirit of the law. One of the specific reasons that the judge raised was that at the time of paying it was unclear what period of time a renewal fee was to cover and hence it was impossible to include in the definition of rent. I wonder what the same judge would say about reikin (礼金, the not very voluntary act of paying 1 or 2 months of rent to your landlord at the time of signing your rental contract).

The consumer contract law was passed in April 2001 in order to protect consumers from abuse in contracts that they have signed. It’s open to very broad interpretation and measures all contracts in terms of quantity and quality of information provided to consumers and ideally protects them from being abused, especially when they are not in a strong negotiating position.

I suppose this debate in this case probably boils down the question of whether or not you would be willing to pay a higher monthly rent for the pleasure of abolishing the renewal fee. At the end of the day most landlords include this in their budgeting and without it would almost prefer you to leave so they can sign on a new tenant for their reikin. But, given the considerable oversupply of rental properties at the moment it might not be that practical for landlords to raise their rent. That would mean rents on long-term properties would fall by 8% (assuming 2 months renewal for a 2 year contract). Bad for inflation but good for renters like you and I.