Renting in Japan vs America – Part 1

Inspired by the news the other day that a Kyoto district court has rules that housing rental contract renewal fees are a violation of consumer rights, I thought I would write a brief introduction to how renting works, based primarily on my own experiences.

I have rented twice in America, three times in Japan, and one time in Taiwan, with an asterisk. As this post was getting quite long, I’ve decided to split it up into three pieces. Since I want to go in chronological order, I’ll first discuss America with a brief mention of Taiwan, then part 2 will discuss how it works in Japan, and finally in the third part I will break down my actual housing contract as specific examples.

I went to college at Rutgers, the State University of New Jersey, in the small city of New Brunswick. After two years in various dorms I decided to move out, and went looking for a house or apartment to share with a friend or three. The Rutgers campus is surrounded by a zone of houses (with a very few apartment buildings) which are occupied almost entirely by students renting from year to year, formed as if the city were insulating itself from the campus in much the manner of an oyster generating a pearl to protect its soft, fragile body from a piece of grit. Since houses in the area are almost entirely for students, landlords can advertise directly to them quite easily through the housing office bulletin board etc, so there is no need for anyone to involve real estate agents. In most cases, the owner of the house rents directly to students, and are usually very amateurish about arranging repairs etc. The security deposit is equal to 1.5 months rent, as specified by city ordnance, and must be kept in a special bank account which may be used only to store the security deposit. When first moving in, the only thing you pay are first month rent, last month rent, and the security deposit. There is no “renewal fee” or anything similar, and in ordinary circumstances, most of the security deposit is returned.

This is pretty much the procedure throughout the US. While houses may be rented directly by the owner or through a real estate agent (who I presume earns some sort of fee), one often has contact with the landlord (i.e. the actual owner) after moving in, but owners of multiple properties may hire a company to deal with residents for them. Large apartment buildings generally have a superintendent who manages building, particularly construction, although I am somewhat vague about how small apartment buildings generally work. Security deposit is usually legally restricted to an amount of 1.5 or 2 months rent, and contract renewal fees are illegal. There is one big exception in the case of ‘key money’, which I will discuss later.

I should also add that exclusion by race or nationality is highly illegal, to the point where realtors are legally prohibited from even discussing the racial makeup of the neighborhood, should the renter be trying to, for example, avoid living near black people. This is very strictly enforced (at least in some states.) My mother had a good friend who worked as a realtor, who told me that the New Jersey state board of real estate (or whatever the official name is) actually sends undercover inspectors to do random checks of real estate agents and make sure they are following the discrimination guidelines. Realtors who break the rules lose their license.

I lived in one such house for a year (actually the first story of a two family house, as many houses are in the area), went to Japan for two years, where I lived in school dorms, and then returned for my final year at Rutgers, where I shared a second-story apartment of a different two-family house, which had been arranged while I was away by the girlfriend of a good friend (the girl being Jess Rees and the friend being Brian Cervino, both members of the band Huma whose music I recommend), and another guy that she knew. I’m afraid I forget now exactly what the rent was, but it came out to somewhere between $300 and $400 per person, plus some more for utilities. The security deposit in New Brunswick is set by law at 1.5 months, and in both cases most of it was returned, although well after the 30 day window required by law. As a student with no independent source of income, the landlords also required parents to co-sign as a guarantee. This is common in the US in such situations, but is not usual for renters who actually have a stable job. In both cases, everyone living in the apartment signed the lease, but the room and rent allocation was not explicitly spelled out, which in retrospect might have been a good idea, as there were some minor arguments in that area in the first house (although none at all in the second.)

I next went to study in Taiwan for a few months, where had arranged no housing in advance aside from a one-week reservation in a youth hostel, but almost immediately found a promising room advertised on a bulletin board at school. This experience gets an asterisk because as a subleter I never signed, or even examined, a contract and know relatively little about the local procedures and laws. My general impression, however, is that it works more or less the same as in most of the US, with no ‘key money’ or renewal fees, and only moderate security deposits. It seemed to me that rentals often go through agents (at least in apartment building-dominated Taipei) but perhaps in smaller cities/towns there are more landlords renting directly.

Stay tuned for part 2 tomorrow.

14 thoughts on “Renting in Japan vs America – Part 1”

  1. Ugh. Part 2 is going to be painful.

    Japan is so scatter-shot about tenants’ rights; the law here effectively makes it nearly impossible to get an apartment, but very easy to stay in one forever.

  2. Heh. I originally thought I’d write one fairly brief post, but once I got to the Japan part I realized it was not to be. Part 2 is already longer than part 1 and not nearly done.

  3. For what it’s worth, I recall the following exchange between my stepmom and a real estate agent in South Carolina:

    HER: This place looks really nice for the price.
    HIM: Yeah, but you’d be a grain of salt in a jar of pepper.

  4. I can already see the direction that this is taking. 🙂

    A few months ago I rented my first own apartment in Germany, there is also no key money, and the security deposit also has a legal limitation, I think it’s not allowed to be more than three times the ‘cold rent’ (without fees for heating, water, garbage collection, etc.) and it is also usually returned when the contract ends.

    In the end I chose an apartment that was advertised by a real estate agent who also wanted a service fee, which was quite high, 2.38 times the cold rent. I still feel that this was a rip-off but it’s quite common in Germany for real estate agent to collect such fees. In many cities you don’t have a problem to find an apartment on your own, but in my city there’s a shortage of apartments and when applying for an apartmend that has some agent’s service fee attached, at least you won’t have to compete against most students.

    When I was working in Japan for a while, I was living at a dormity that was provided by the company, so I didn’t came in contact with all the details concerning renting in Japan.

  5. I’ve had only good experiences renting in Japan and only great experiences renting back home. I recently got a place with no deposit – only a month rent up front.

    My parents-in-law have a few rental properties in Japan. The agency that they get to rent them out and deal with the tenants actually has private investigators on staff. One recent potential tenant, it turned out, was hoping to put his “aijin” up there and was turned down despite having something like 120 man in up front money for the various fees. They ended up missing three months rent (enough for a week in Hawaii). I raised the possibility that this was an ideal tenant – no kids, only one person there most of the time. No dice. This kind of hardassness is the rule for renters in Japan as I understand it.

  6. That’s a great anecdote, but let’s save the comments on Japan specifically until after I post the second part tomorrow. I’d love to get more stories like Haf’s though, on how it works in different countries. M-bone, got anything on differences between how it works in the US and Canada, or different provinces?

  7. I’ve only rented in Japan and one province. Otherwise, university dorms and stuff that don’t count.

    Lots of anecdotes, however – I know renters in Canada who, honestly, won’t rent to “blacks” (total @$$holes). They just say that they having a waiting list of people who will get back to them, make up some nutso condition when potential tenants show up, etc. I’ve also had a few students tell me that they couldn’t get a place because they were told that they couldn’t rent if they didn’t speak English. I’m not 100% sure that one is true, however. There are legal defences against that type of thing but I’m not sure how well they work.

    I also know a guy who moves between countries a lot and makes a point of trashing apartments when he finds out that he won’t get deposits back. He even claims to have ripped most of a wall out. Of course, I know someone who was at a subsidised JET house in Japan and sold the couches and stuff a day before leaving. Quite a caper.

  8. My first experience renting an apt. as an adult came in Tokyo, so I looked forward to not having to deal with this “key money”/reikin and “renewal fee” (every 2 yrs, right?) monkey business when renting in the US. The process on the whole was much easier, but I was wholly unprepared for the annual rent increase.

    Shortly before my one-year contract expired I was provided with the necessary documents to renew my contract for an additional year, at a monthly rate 5% higher than my current rent (eg. $1000 –> $1050, or an extra $600 per year). I foolishly agreed to the renewal before learning from a friend that I probably could have bargained them down to a 3% increase. From what I can gather, these increases occur every year and range from 1.5%-5.0% depending on local economic factors and demand for rental units. I’ve inquired a few different places about entering into a longer-term (2 year or more) contract to lock-in at a given rental rate and avoid increases, but it seems that few apt. renters are willing to do anything other than a one-year contract.

  9. My husband and I own two condo apartments which we rent out, one in New Jersey and one in Florida. A few points of interest:
    (a) Discrimination: Per USA (federal) law, it is illegal to discriminate not only on the basis of race and nationality (national origin), but also “color, religion, sex (meaning gender), familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap (disability).” So except for approved “Senior Citizen” housing (age 55 and over), one cannot turn away a family with children, unless there would be more than 2 people to a bedroom. There are some exceptions to the USA law besides “senior housing” such as owner-occupied buildings with no more than four units, single-family housing sold or rented without the use of a broker, and housing operated by organizations and private clubs that limit occupancy to members only.

    (b) Security Deposits in New Jersey: it is STATE law (not just local ordinance) that the Security Deposit cannot exceed 1.5x the monthly rent. Not only must the security deposit be placed in a separate bank account, it must be an INTEREST bearing account with the yearly interest paid annually to the tenant. The NJ Rent Security Deposit Act applies to all rental units, including tenant-occupied, single-family homes. The only exception is for rental units in owner-occupied buildings that have no more than two units other than the owner-landlord’s unit.

    (c) Security Deposits in Florida. There is no state law specifying the size of the security deposit. Furthermore, the landlord is allowed to deposit the money in a NON-interest bearing account. IF the landlord deposits the money in an interest bearing account, then interest must be paid to the tenant annually. Since our condo is part of a large condo association, and since the association has a managment team to handle rentals (for which we pay a fee), we let the management handle all leasing arrangements. Currently, the deposit is equal to one month’s rent. We, the Lessor (landlord) paid the broker a $159 brokerage commission and a $500 locator fee. In addition, we (the landlord) pay the Condo Management $1,000 (per 12 -24 month lease) for acting as our agent. The tenant is paying the $1,100 mo rent and the $1,100 security deposit.

    Hope this adds some interesting information.

  10. Pettis, what part of the US is this? Annual rent increases often have a limit, and it may be lower than 5%.

  11. This is in Illinois. As far as I know the state of Illinois does not permit “rent control” policies, thus there are no rent-controlled apts in Chicago or elsewhere in the state as is common in NYC and some other major cities. That’s not to say there may be a limit on yearly rent increases, but if there is one I don’t know what it is.

  12. BTW, I had planned to post part 2 yesterday or the day before, but since we’ve had so much discussion on other threads I decided to hold off until tonight or tomorrow.

  13. Good stuff! My experience in NYC was through a broker. They took a commission of 15% of the first year’s rent and since I had little to no financial record, I had to pay 6 months of rent up front to the landlord (which included the first month and security deposit) so that in the end there was 4 months of rent covered ahead of time. When my roommate moved after the first year, he took his half and the landlord let me skip a month while I looked for another roommate, leaving the security deposit as a one month deposit in the end.

    As far as things go in Korea, there are four basic methods of securing housing for both Koreans and Foreigners. For both you can do the following:

    1] Pay what’s called “윌세,” (translated roughly as “monthly fee”) which is usually between $5,000 and $20,000 up front and a monthly rent plus utilities. If you choose to pay more you can sometimes lower your monthly rent.

    2] Pay a “천세” (yearly fee) which can range anywhere from $80,000 to $300,000+, depending on the apartment. This has the benefit of you owing no monthly rent and instead simply being in charge of utilities and such.

    Both fees are returned to you minus damages and such at the end of your contracted term. My understanding is that this fee is meant to be put in an account neither party can touch until the end of the agreed upon contract. It’s generally honored, but practically guaranteed no trouble if you go through a realtor. They won’t work with renters that are legal problems.

    3] Move in with roommates and either split the key money or find a person who has taken care of the key money and pay them rent.

    Now, where things differ is here:

    a.] Koreans often live with their parents until they get married and after that it depends on the order the man was born. If he was the first born, he and his wife generally continue to live with the parents, caring for them and such. If he’s not the first born, he is either expected to provide a place to live or his parents will help him out with that. These days it seems the woman’s family is more willing to help (such as in my case!), and so the societal expectations seem to be giving some way.

    b.] Foreign teachers living in Korea are often provided with housing as a stipulation in their contracts in Korea, and so most incoming foreign teachers have not too much to worry about in that regard. Some schools opt to provide a housing stipend and the fee (also called key money here in general) instead, giving the teacher more freedom to find their own home.

    And there you have it! I personally have not put down the key money for any apartments in korea, but I did go the roommate option for awhile and spoke to the guy who had paid the key money about his experiences. Generally, people will take out loans from the bank to cover their key money and get roommates to pay the rent and utilities. However, some people do have money… so what can I say:d

    Hope you found this interesting, just wanted to add my two cents. If you want to know more, feel free to ask!

  14. Oh, something else I forgot to mention about the Korean key money accounts: the Landlord keeps the interest on the account, and so the renter gets their fee back minus interest.

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