For Foreigners Considering Buying Vacant Homes in Japan—What Is a “Non-Rebuildable Property”?

An increasing number of foreign buyers are showing interest in Japan’s vacant homes (“akiya”) and traditional houses (“kominka”). Their relatively affordable prices and the charm of traditional Japanese living are among the main reasons for this growing appeal.

However, caution is required if a property listing includes the term “non-rebuildable” (再建築不可). This designation means that the construction of a new building on the site is not permitted.— and even renovations may be restricted. Even if you realize after purchasing the property that “you can't use it as you intended,” you will not be able to cancel the transaction.

In this article, we explain what a non-rebuildable property is, the restrictions that may arise after purchase, and procedural precautions that are particularly important for foreign buyers.

What is a “Non-Rebuildable Property”?

The Meaning of “Non-Rebuildable”—Land Where You Cannot Rebuild

A “non-rebuildable property” refers to a property where a building currently exists, but once that structure is demolished, a new building cannot be constructed on the land.

The current building can only be used as is. However, the moment the existing building is demolished, the new owner loses the right to build a new one. This is the most significant risk of non-rebuildable properties.

 Why do such properties exist?

The Building Standards Act was established in its current form in 1950. Many buildings constructed before that date are situated on land that does not meet current road frontage requirements mentioned above. This is the reason why so many old vacant houses and traditional Japanese homes are classified as non-rebuildable properties.

Post-Purchase Limitations — Why “Affordability” Isn’t the Only Consideration

No Rebuilding or Extensions Allowed

Properties classified as non-rebuildable cannot be rebuilt. As a general rule, extensions are also not permitted. Even though the building continues to age and deteriorate, it cannot be replaced with a new structure, which makes it difficult to maintain its long-term value as an asset.

Renovations also have restrictions!

Even for properties deemed non-rebuildable, renovations involving repairs to parts of the building may sometimes be possible. However, if the scope of the work qualifies as “major repairs” or “major remodeling,” a building confirmation application (a prior application approval procedure with the local authorities) becomes necessary.

For non-rebuildable properties, this application may be denied.

Difficulty Obtaining a Mortgage

Many Japanese financial institutions do not grant mortgage loans for non-rebuildable properties and will not accept them as collateral for properties that cannot be rebuilt.

As a result, in most cases, it is not possible to obtain a housing loan to finance the purchase of the property. In many situations, buyers must expect to finance the full purchase price entirely with their own funds.

Difficulty for Future Sales or Disposal

Because of the restrictions above, the pool of potential buyers will be limited.

• You may not be able to achieve your desired price when selling
• The sale may not complete within your ideal timeframe
• In the event of inheritance, heirs wishing to dispose of the property may find themselves unable to do so due to a lack of interested buyers
  

Unique Issues When Foreign Nationals or Non-Residents Purchase Non-Rebuildable Properties

Can Foreign Nationals Purchase and Register Property?

In short, foreign nationals are legally permitted to purchase real estate in Japan.

Japanese law itself does not impose nationality-based restrictions on the acquisition of real property.

Foreign nationals who hold a valid residence status (visa) in Japan can obtain a residence certificate.

In such cases, the overall purchase and registration procedures are not significantly different from those applicable to Japanese nationals.

For Those Who Live Out of Japan

Individuals who reside outside of Japan cannot obtain a Japanese residence certificate. (juminhyo). This is a legal document that shows where your legal residence is located in Japan.

Instead of a Japanese residence certificate, you will need to have documentation in lieu of the Japanese residence certificate. The specific documents needed will vary depending on your country of residence.

In many cases, an affidavit (a personal identification document signed before a competent authority or notary public in your country of residence) must be prepared.

Because the exact requirements differ from case to case, consulting with a qualified professional is particularly important.

Things to Know When Considering Purchase Despite These Issues

Scope and Restrictions of Renovations

Even with properties deemed unfit for reconstruction, minor repairs or interior work may sometimes be possible. However, what can and cannot be done is clearly determined by the scale and nature of the work.

“How much work can be done” requires individual assessment for each property.

When to Consult an Expert

When you begin considering purchasing a property that cannot be rebuilt, you need to confirm whether it can be used as you intend.
Keep in mind that after signing the real estate contract, your options become significantly limited.

• Confirm road frontage and legal status of the land before making an offer
• Clarify what renovations are permitted with a construction professional
• Understand the financing limitations — plan for full cash purchase
• Non-residents: prepare required identification documents well in advance

If you are considering purchasing a vacant house in Japan, please consult with Kobe Legal Partners first.

Purchasing a property that cannot be rebuilt involves more matters to confirm than a typical real estate purchase. For foreign nationals and non-residents, document preparation and procedures become even more complex.

At Kobe Legal Partners, as Shiho-shoshi lawyer, our office handles real estate registration procedures for various types of real estate transactions. A Shiho-shoshi lawyer is a legal professional that specializes in, among other things, real estate transactions, including all of the required documentation.

In particular, we are proud of the real estate services that we have provided for foreign nationals in Japan and non-residents. From document review to the filing of registration, everything is handled within a single office.

Consultations are available in Japanese and English.

Feel free to contact us for an initial inquiry.