In recent years, a contract format known as the “fixed-term building lease” (teiki tatemono chintaishaku) has been rapidly increasing in Japan’s building lease market, particularly in the Tokyo metropolitan area. According to reports, the proportion of fixed-term building lease properties in the 23 wards of Tokyo reached approximately 10% in 2025, a significant increase from the previous level of around 5%. 

 

A fixed-term building lease is a system in which the lease agreement definitively terminates without renewal upon the expiration of the term stipulated in the contract. This differs significantly from the conventional “ordinary building lease” (futsu tatemono chintaishaku), in which the lessor cannot refuse to renew the contract unless there are justifiable grounds. 

 

The fixed-term building lease was introduced as a system in 2000 with the aim of promoting the supply of high-quality rental housing, such as family-oriented homes, including the conversion of owned homes into rental properties. However, in the context of recent price increases, it has been pointed out that the high degree of freedom lessors have to revise rent is contributing to soaring rent prices. While it is an accessible and convenient system for foreign owners who hold apartments or other properties in Japan and are considering multiple investment strategies such as leasing or selling, extreme caution is required when renting a room as a lessee. This article compares the two contract types and explains their features. 

 

Comparison Between Fixed-Term Building Lease Agreements and Ordinary Building Lease Agreements 

 

1. Differences in Contracting Methods

Fixed-term building lease agreements are strictly limited to contracts executed in writing (such as a notarial deed) (Act on Land and Building Leases (hereinafter the same), Article 38, Paragraph 1). Furthermore, separately from the contract document itself, the lessor must provide a written document to the lessee in advance and explain that “the contract will not be renewed and will terminate upon the expiration of the term” (Article 38, Paragraphs 3 and 5). Note that both of these documents can be provided via electronic data or similar means. 

 

In contrast, there are no formal requirements for an ordinary building lease agreement, and the contract can be concluded either in writing or orally. 

 

2. Presence or Absence of Contract Renewal

In a fixed-term building lease agreement, the contract terminates upon the expiration of the term, and there is no renewal. However, if both the lessor and the lessee agree, it is possible to execute a “re-contract” (a new contract). If a re-contract is not to be made, and the contract period is one year or longer, the lessor must notify the lessee within the statutory period that “the fixed-term building lease will terminate upon the expiration of the term” (Article 38, Paragraph 6). 

 

On the other hand, in an ordinary building lease agreement, the contract is renewed unless there are justifiable grounds. The determination of these “justifiable grounds” comprehensively considers multiple factors, including: (1) a comparison of the circumstances under which both the lessor and the lessee require the use of the building; (2) the prior history regarding the lease of the building; (3) the utilization status and current condition of the building; and (4) offers of property benefits, such as an eviction fee (Article 28). 

 

In this regard, the practical difference between the two contract forms is significant. In an ordinary building lease agreement, if the lessor requests a rent increase and fails to reach an agreement on the rent with the lessee, the lessor refusing to renew the contract based solely on that reason may not be recognized as having justifiable grounds. Conversely, in a fixed-term building lease agreement, if an agreement on rent cannot be reached with the lessee, the contract definitively terminates upon the expiration of the term. Thus, the fixed-term building lease agreement is structured in a way that makes it easier for lessors to advance rent revision negotiations with lessees who wish to continue living in the property. 

 

3. Rent Revision and Mid-Term Cancellation

Regarding rent revisions, in a fixed-term building lease agreement, both the right to request a rent increase and the right to request a rent decrease can be excluded by a special agreement (Article 38, Paragraph 9). On the other hand, in an ordinary building lease agreement, only the right to request a rent increase can be excluded by a special agreement (Article 32, Paragraph 1). 

 

Mid-term cancellation during the contract period can be stipulated by a special agreement in both contract forms. Furthermore, a fixed-term building lease agreement also stipulates a statutory right to mid-term cancellation. Specifically, for residential buildings with a floor area of less than 200 square meters, if it becomes difficult for the lessee to use the building as their principal base of living due to unavoidable circumstances such as a job transfer, medical treatment, or nursing care for a relative, the lessee may request a mid-term cancellation (Article 38, Paragraph 7). 

 

Conclusion 

While the fixed-term building lease system provides lessors with management certainty and a degree of freedom, it presents lessees with the possibility of being unable to continue living in the property and the risk of rent increases. However, properties that adopt fixed-term building leases often tend to be attractive, such as being located in highly convenient areas in the city center or being high-quality rooms rented out for a limited time due to the owner’s job transfer. Additionally, to compensate for the aforementioned disadvantages for the lessee, the rent and other initial costs are sometimes set lower than those of properties under ordinary building lease agreements. 

 

When considering a lease agreement in Japan, whether you are the lessor or the lessee, it is important to fully understand the characteristics of both contract forms and make the optimal choice for your specific situation. 

 

(References) 

“Apartments with ‘Fixed-Term Leases’ That Make Raising Rent Easier Reach 10% in the City Center, Fueling Inflation” (The Nikkei Online Edition, January 26, 2026). 

Ministry of Land, Infrastructure, Transport and Tourism, “Fixed-Term Building Leases” (Accessed on June 30, 2026, https://www.mlit.go.jp/jutakukentiku/house/jutakukentiku_house_tk3_000059.html)