Got those rental blacklist blues

August 18th, 2009 by Philip Brasor & Masako Tsubuku

real estate black list

A front page article in the Aug. 15 Asahi Shimbun reported that 15 “yachin hosho kaisha” (rental guarantee companies) are planning to get together to compile a blacklist of rent scofflaws. Rental guarantee companies are a relatively new phenomenon. Normally, when you rent a property in Japan you need a guarantor to cosign the rental agreement.

For residences, landlords have traditionally insisted on family members, invariably parents, regardless of the age of the parents or their incomes relative to the prospective tenants’. Sometimes this is impossible because the parents are dead or otherwise estranged from the prospective tenant. And sometimes it’s impossible because the prospective tenant is a foreigner. (Many foreigners have their sponsoring employers cosign their rental agreements, which landlords prefer, anyway.)

When the usual guarantors are not options, the prospective tenant can hire a guarantee company, which usually charges a nonrefundable fee equal to about one month’s rent, both when the tenant signs the initial rental agreement and when he or she renews it.

The main job of the guarantee company is to pay the rent if the tenant is delinquent. Needless to say, landlords prefer this system since they are guaranteed their money and the headache of evicting delinquent tenants is borne by someone else.

According to the land ministry there are about 70 rental guarantee companies in Japan right now, and the number is growing every year. More significantly, about 40% of current rental agreements are cosigned by such companies, a result of Japan’s aging society and the deterioration of job security (i.e., employers no longer acting as cosigners). According to a research company interviewed by the Asahi, these companies’ revenues are rising every year. The company surveyed 29 rental guarantee companies and found their combined revenues for 2008 was ¥22 billion, or double what it was in 2006.

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