Why Property Registration Matters in Japan

When you buy real estate in Japan, you may assume that once you sign the purchase agreement and pay the purchase price, the transaction is complete. However, in Japan, real estate registration plays an important role in allowing you to assert against third parties that the property you purchased belongs to you. If you leave the property unregistered for some time, you may find that, even though you paid for it, you can no longer assert that you are the owner.

In fact, there was a case in which a foreign national who bought real estate in a private sale did not register the purchase, and a person who later bought the same property from the seller registered it first. As a result, the foreign national was ultimately unable to secure the property as their own. In this article, we explain what registration does, how the closing works, and what to prepare before you buy.

What Does Real Estate Registration Record?

Real estate registration is a system that records the rights relating to each parcel of land and each building, such as who the owner is and whether the property is subject to a mortgage or other security interest, and makes those records available for anyone to review. By checking the real estate registration records, a buyer can confirm whether the seller is in fact recorded as the owner and whether there are any mortgages or other security interests that need to be cancelled.

The way rights in real estate are recorded, and the way real estate transactions are carried out, differ from country to country. Comparing Japan’s system with the system in your home country can make it easier to understand. Please note, however, that even if you would like to purchase property in Japan following the same steps as in your home country, this may not be possible because the systems are different.

Becoming the Owner and Registering Ownership Are Different

Under the Civil Code of Japan, as a general rule, ownership of real estate is transferred by agreement between the seller and the buyer (Article 176 of the Civil Code). When ownership actually transfers is determined by the terms of the purchase agreement. In a typical purchase agreement, the parties agree that ownership will transfer when the purchase price has been paid in full.

At the same time, the Civil Code provides that the acquisition of rights in real estate cannot be asserted against third parties unless it is registered (Article 177 of the Civil Code). “Cannot be asserted against third parties” means that you cannot claim to be the owner as against a person who is not a party to the agreement. In short, even if you become the owner under the agreement, if you have not registered your ownership, you may be unable to protect that right against third parties.

An Actual Double-Sale Case

This is a case that was brought to our firm for consultation. A foreign national purchased real estate in Japan in a private sale. Neither a real estate agent nor a shiho-shoshi lawyer was involved in the transaction. The buyer paid the purchase price to the seller but did not register the transfer of ownership.

The seller then sold the same property to another person, and that person registered the transfer of ownership first. Selling the same property to two different buyers in this way is called a “double sale.” Although the foreign national had paid for the property first, it was the later buyer who completed the registration first. As a result, the foreign national could not assert ownership against the later buyer and, in the end, was unable to secure the property as their own.

This matter is also being investigated as a criminal case. However, the seller did this because they were in financial difficulty, and there is very little prospect that the purchase price will be recovered.

In a double sale, which buyer can assert their rights may depend on the circumstances of the later buyer, among other factors. The person who registers first does not always prevail. Even so, a buyer who has not registered is drawn into this kind of dispute and must bear a heavy burden in trying to recover what they have lost.

If a shiho-shoshi lawyer had been involved, as in a typical real estate transaction, a situation like the one in this case could not have occurred. This is because a shiho-shoshi lawyer will not tell the buyer that it is all right to pay the purchase price until the lawyer has confirmed that all of the requirements and documents for filing the application for registration are in place. The shiho-shoshi lawyer then files the application for registration on the same day the purchase price is paid.

The Closing, Filing, and Completion Are Separate Stages

In a real estate transaction in Japan, the day on which the purchase price is paid is called the “closing” (kessai). When a shiho-shoshi lawyer is involved, the process proceeds as follows.

On the day of the closing, the shiho-shoshi lawyer confirms whether the application for registration can be filed. Please note that the registration has not yet been completed at the time of the closing. Even so, the application is filed on the day of the closing because, as a general rule, when more than one application for registration is filed for the same property, the Legal Affairs Bureau processes them in the order in which they were received (Article 20 of the Real Property Registration Act). Paying the purchase price and filing the application for registration on the same day prevents a situation in which time passes after payment without the registration having been filed.

Under Japanese law, a real estate transaction does not require the involvement of a shiho-shoshi lawyer in order to be valid. However, by handling the confirmation of the seller, the review of documents, the payment of the purchase price, and the filing of the registration application as one continuous process, the risk illustrated by the case above can be prevented.

What to Organize Before Purchasing

If you organize the following information before consulting us, the discussion will go more smoothly. You do not need to research everything on your own.

Frequently Asked Questions

Do I become the owner only when the registration is completed?

No. As a general rule, ownership transfers by agreement between the seller and the buyer, and when it transfers depends on the purchase agreement. In a typical purchase agreement, ownership transfers when the purchase price has been paid in full. Registration is what allows you to assert your ownership against third parties.

Is the registration completed on the day of the closing?

No. On the day of the closing, the shiho-shoshi lawyer confirms that the application for registration can be filed and files it that same day. The registration is completed after the Legal Affairs Bureau finishes its review.

Is a shiho-shoshi lawyer legally required to buy real estate in Japan?

No. However, when a shiho-shoshi lawyer handles the review of the registration records, the confirmation of identity and intent, the closing, and the filing of the application as one continuous process, a double sale like the case described above can be prevented.