At renewal time, you may need to bill a renewal fee and negotiate changes to the lease terms. Here's how renewal works in practice, and how statutory renewal applies when the parties don't reach agreement.
- For renewing a standard lease (futsū shakuya), the custom of charging a renewal fee varies by region.
- In the Greater Tokyo area, the renewal fee is often around 0.5-1 month's rent, but regional variation is significant.
- Renewal is also an occasion to negotiate changes to terms such as rent or special provisions (tokuyaku).
- If the lease term expires without a renewal procedure taking place, it becomes a statutory renewal (hōtei kōshin).
- Under statutory renewal, the lease continues on its previous terms but without a fixed term.
The Basic Flow of Lease Renewal
For a standard lease (futsū shakuya), it's typical to carry out the renewal procedure before the lease term expires. The management company sends the tenant a renewal notice, confirms whether there's a renewal fee and checks the rent, and then the process moves forward by exchanging a renewal agreement or a simpler memorandum. Notices often go out one to three months before the lease expires, and it's best to work on a schedule with some margin. Because renewal timing differs tenant by tenant, management companies track the schedule year-round to make sure no notice gets missed.
Renewal Fee Rates and Regional Differences
A renewal fee is money the tenant pays the landlord at renewal; it's not a legal obligation but a custom that has taken hold regionally. In the Greater Tokyo area it's often around 0.5-1 month's rent, while some regions have no renewal-fee custom at all — regional variation is significant in practice. Where the lease specifies a renewal fee, that provision governs. Since the renewal fee amount (or its absence) is spelled out in the original lease, it's also important to explain it to the tenant at move-in.
Changing Terms at Renewal
Renewal is also an opportunity to revisit rent or special provisions (tokuyaku). When there's a significant gap versus the local market, or after upgrading equipment, landlords sometimes propose a term change alongside renewal. That said, changing terms requires the tenant's consent — it can't be done unilaterally. Depending on what's being changed, it's a good idea to spell out the new terms in the renewal agreement and have both parties sign and seal it to leave a record of the agreement.
Renewal Documents and the Renewal Agreement in Practice
Renewal can be handled either by drawing up a new renewal agreement or more simply through a memorandum or letter of agreement. Which method is used depends on the practice of the management company or landlord, but clearly documenting the renewal fee amount and the new lease term in writing helps prevent later disputes.
What Is Statutory Renewal (Hōtei Kōshin)?
If the lease term expires without either the landlord or the tenant expressing an intent to refuse renewal, the lease becomes a "statutory renewal" — it continues on the same terms as before, but without a fixed term. For the landlord to refuse renewal, "justifiable grounds" (seitō jiyū) are required; wanting to end the lease simply because you'd prefer to is generally not accepted as sufficient. Even after a statutory renewal, if the landlord wants to end the lease, whether justifiable grounds exist and the cancellation procedure both need separate consideration.
Avoiding Disputes Around Renewal
Most disputes around renewal stem from inadequate explanation of the renewal fee or from a delayed notice of term changes. Sending the renewal notice with plenty of lead time, and carefully explaining the reasoning whenever there's a renewal fee or a term change, makes for a smoother renewal process. Where a specific legal judgment is needed, we'd recommend consulting a specialist.
Frequently Asked Questions
Does the lease end if the tenant doesn't pay the renewal fee?
Non-payment of the renewal fee doesn't automatically end the lease. Treatment differs depending on what the lease specifies and the individual circumstances, so if you have questions, we'd recommend consulting a specialist.
Can rent be raised at renewal?
The landlord can propose it, but an actual change requires the tenant's consent. Without agreement, the lease is generally renewed on the previous terms.
What changes under statutory renewal?
The lease loses its fixed term, while all other terms continue as before. Note that this differs from a fixed-term lease in areas such as the cancellation procedure.
Summary
Lease renewal can involve billing a renewal fee and negotiating term changes. If the lease expires without either party expressing intent regarding renewal, it becomes a statutory renewal and continues on its previous terms. Because treatment varies by regional custom and the specific lease, careful explanation and written confirmation are essential.