Some owners consider raising the rent against a backdrop of rising local market rates or an increase in property tax. However, a rent increase isn't something a landlord can decide unilaterally — it needs to be carried out in line with legal rules.
- Once rent is set in the lease, the landlord cannot unilaterally change the amount.
- The Act on Land and Building Leases (shakuchi shakka hō) provides that a landlord may, in certain cases, demand a rent increase on grounds such as a change in economic conditions.
- Circumstances that can support an increase include a rise in taxes and public dues (kōso kōka) and a gap between the current rent and the local market rate.
- The basic approach is to first aim for an agreement through discussion with the tenant.
- If discussion doesn't lead to agreement, the matter may move to mediation (chōtei) and then, after that, litigation.
Can an Owner Freely Raise the Rent at Their Own Discretion?
The rent set out in a lease isn't something a landlord can unilaterally change. To raise it, you need either the tenant's agreement or a rent increase demand (chinryō zōgaku seikyū) that satisfies the legal requirements. The first thing to keep in mind is that a rise in the surrounding market rate doesn't mean a landlord can change the rent with a single notice.
The Legal Basis for a Rent Increase Demand (the Act on Land and Building Leases)
Under the Act on Land and Building Leases (shakuchi shakka hō), a landlord may demand a rent increase when the rent set in the lease has become unreasonable due to circumstances such as a change in taxes and other public charges on the land or building, a shift in land prices or the general price level, or a comparison with the rent for similar nearby properties. That said, if the lease has a special clause (tokuyaku) not to raise the rent for a set period, that clause takes priority. A rent increase demand is said to take effect from the moment it's communicated, and if a tenant disputes it, a later settlement of the difference against the amount the court finds reasonable can become an issue.
Circumstances That Can Support a Rent Increase
Circumstances that are easy to cite as grounds for an increase include a rise in fixed asset tax and city planning tax, an increase in the rent for similar properties nearby, and a rise in asset value from large-scale building repairs. Rather than relying on a subjective sense that an increase is warranted, it's advisable to be able to explain it with objective supporting material. Preparing materials in advance — nearby listing examples, tax notices for taxes and public dues, and the like — makes explaining things to the tenant, and any later procedure, go more smoothly. Conversely, in an area with a long-running vacancy or where the surrounding market rate has fallen, a claim for an increase is less likely to be accepted, and this is worth keeping in mind.
The General Steps for Carrying Out an Increase
In practice, the common approach is to first convey your intention to raise the rent and the reasons for it to the tenant through your management company, and aim for agreement through discussion. If agreement is reached, put the new rent and when it takes effect in writing — a memorandum, for example. If the increase you want is large, proposing a phased increase rather than jumping straight to your target amount can make it easier to get the tenant's understanding.
What Happens If the Tenant Doesn't Agree
If discussion doesn't lead to the tenant's agreement, one option is to file for civil mediation (chōtei). If mediation still doesn't produce agreement, the appropriate rent amount will ultimately be decided through litigation — but because that takes time and money, in practice many cases still aim for a negotiated resolution. Before moving to mediation or litigation, we recommend consulting your management company or a lawyer to get a sense of the likely outcome and whether it's worth the cost.
Frequently Asked Questions
Can I only raise the rent at contract renewal?
Not necessarily — a rent increase demand is said to be possible partway through the lease term too, as long as it meets the requirements under the Act on Land and Building Leases. In practice, though, it's often discussed at renewal time.
What if the lease has a special clause saying rent won't be raised for a set period?
If such a special clause (tokuyaku) exists, it takes priority, and a rent increase demand during that period may be restricted. You need to check the content of the lease.
If the tenant won't accept the increase, can I have them move out?
Terminating the lease solely because the tenant won't agree to a rent increase is generally considered difficult to justify. If you're unsure how to handle it, we recommend consulting a professional. Forcing the issue toward termination can instead worsen the relationship with the tenant and turn into a longer-running dispute.
Summary
A rent increase isn't something a landlord can freely decide at their own discretion — it needs to be carried out in line with the requirements under the Act on Land and Building Leases and through discussion with the tenant. After organizing objective reasons — a rise in fixed asset tax, a gap with the local market rate, and the like — the basic approach is to start with a conversation aimed at reaching agreement.