Japan: Real Estate Transaction Business Act Amended

An amendment to Japan’s Real Estate Transaction Business Act (Act No. 176 of 1952) was promulgated on June 3, 2016. (Act to Amend the Real Estate Transaction Business Act, Act No. 56 of 2016, OFFICIAL GAZETTE (June 3, 2016), at 31, Official Gazette website (in Japanese).) The Japanese government is trying to revitalize the used housing market, reduce the number of empty houses, and facilitate house sale transactions by owner-residents and thereby increase homeowners’ asset value, boost the economy, and enhance the country’s quality of life. (Press Release, The Cabinet Approved the “Bill to Amend the Real Estate Transaction Business Act,” (Feb. 26, 2016), Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) website (Feb. 26, 2016) (in Japanese).)

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The amendment is one among several measures the government has taken over the last decade or so. For example, formerly, a buyer of an old house that was more than a certain number of years old was not eligible for a tax reduction for a mortgage. Under a 2005 tax revision, the buyer of an old (used) building may obtain such a tax reduction by satisfying current earthquake resistance standards. As another example, beginning in 2005, the Japan Housing Finance Agency made it easier for used house buyers to obtain a preferred (lower) mortgage. (Regarding Efforts to Boost the Used Houses Market, Utilize Vacant Houses, and Facilitate House Transactions by Resident Owners, Housing Department & Land and Construction Department, MLIT, at 4 (Aug. 3, 2015) (in Japanese).)

In Japan’s housing market, the ratio of used houses is low compared with other developed countries. For example, the proportion of used versus new houses in the housing market is 83.1% in the United States, while it is just 14.7% in Japan. (Id. at 2.) The government determined that one of the reasons for low sales of used houses is that it is hard for consumers to evaluate the quality and value of used houses, therefore they hesitate to buy them. (Cabinet Approved the “Bill to Amend the Real Estate Transaction Business Act,” supra.) To change this situation, the amendment obligates real estate agents to recommend house inspection experts to the seller of the house, in writing. (Real Estate Transaction Business Act, art. 34-2, ¶ 1, item 4.) The agent must also inform a potential buyer of whether the house has been inspected and, if so, provide him or her with a summary of the inspection results. (Id. art. 35, ¶ 1, item 6-2 (a).) The real estate agent must furthermore inquire of the seller whether he or she has kept design and engineering drawings and convey such information to potential buyers

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