Tenant Fees In Japan Finally Illegal

This news clipping below from Asahi Shimbun News is welcome relief. I've been a vocal critic for many years about the Japanese practice of "key money" payments by tenants to landlords. Effectively the amount varying between 1-2 month's rent is paid as a near universal bribe in major cities each time the lease contract is renewed. There is no service or reciprocation for the money, it is simply a transfer of disposable wealth from renters to owners.

Established after the Second World War to limit any influx of returning soldiers to the big cities it's continued raison d'etre was to limit the mobility of people from moving out of low paying areas to better paying ones. Helpful to industry and the owner class, the right-leaning and pro-business LDP never lifted a finger to ban the practice. However, the scam was on flimsy legal ground given that it failed a primary requirement of any contract; namely that there be "consideration" (some effort) given by both parties for any agreement to exist.

In a time when disposable income is scarce and the economy is in constant deflation, the shutting off of the blatantly unfair money-draining spigot into the pockets of the wealthy may go some way to helping the crisis.

Tenant renewal fees ruled illegal

BY RYUJI NAKAGAWA - THE ASAHI SHIMBUN

KYOTO--The district court here has ruled illegal the practice of landlords collecting fees when tenants renew their housing contracts.

Lawyers for the plaintiff hailed the decision as a "landmark ruling."

The Kyoto District Court on Thursday ordered a landlord to pay back 466,000 yen paid by the plaintiff, a company employee in his 20s.

"There is no justifiable reason for tenants to shoulder renewal fees, and the (plaintiff's) contract is invalid," Presiding Judge Toshio Tsujimoto said.

The plaintiff's lawyers said the ruling will speed up moves to protect consumers.

Many tenants have lost similar lawsuits over renewal fees, according to the lawyers.

The plaintiff demanded the landlord reimburse 116,000 yen in renewal fees as well as 350,000 yen paid as an initial lump-sum deposit.

He said the payments violated the Consumer Contract Law, which went into effect in 2001 to protect consumer rights in commercial transactions.

He paid the deposit when he moved into an apartment in Kyoto in April 2006 and the renewal fee--double the monthly rent--in January 2008.

When the plaintiff told the landlord in May 2008 that he would terminate the contract, most of the deposit was not returned.

The landlord cited a practice known as shikibiki tokuyaku, a contract clause that unconditionally forfeits part of the deposit when tenants terminate their contracts.

Courts around the country have ruled this particular practice invalid in favor of tenants.

Renewal fees are charged for many rental housing units in the Tokyo metropolitan area and prefectures such as Kyoto, Shiga and Fukuoka.

The plaintiff's lawyers said it was illegal for landlords to impose financial burdens other than rent on tenants.

Lawyers for the landlord said renewal fees and shikibiki tokuyaku are supplementary to the rent or serve as its down payment.

They said the renewal fee was what the landlord receives for abandoning the right to refuse the renewal and that part of the deposit was forfeited to repair damage to the apartment caused by the tenant.

The ruling said that the tenant, in principle, was not required to pay money other than the rent.(IHT/Asahi: July 25,2009)