In Japan, when renting a property, you may be required to pay a deposit.
The term "security deposit" is a business practice found mainly in the western part of Japan, and is unfamiliar to people in the Kanto region. Also, many people are unaware of its nature.
So what is the nature of a security deposit?
This time, we will explain in detail what a security deposit is in a rental contract, how it differs from the security deposit and key money that are commonly used in the Kanto region, whether it is returned when you move out, and the amount.
What is a security deposit in a rental contract?
A rental deposit is money that is held by the landlord as security and to restore the property to its original condition when signing a rental contract.
This is money to be used for repair costs when the tenant falls behind on rent or breaks or soils the room's facilities. It is treated as a so-called security deposit and is included in the initial costs.
This was originally a business practice adopted in some areas of Western Japan, such as the Kansai, Chugoku, and Kyushu regions, and the going rate is said to be three to six months' rent.
The use is almost the same as that of a deposit in the Kanto region, but there are some small differences and it cannot be said that they are exactly the same.
So, first let's understand the meaning of deposit and key money.
What are security deposits and key money when renting?
We will explain about the deposit and key money in a rental contract.
Deposit (money deposited with the landlord as security)
A security deposit is money that is deposited when signing a contract and acts like insurance.
This will cover the cost of house cleaning and repairs required to return the property to its original condition when you move out, and will also be used as collateral in case you fail to pay your rent.
When you move out, the amount will be returned minus the cost of restoring the property to its original condition. However, be aware that if the cost is not enough even after paying the full deposit, you may be charged an additional amount.
In addition, if there is no need to restore the room to its original condition, the full amount may be refunded, but there are also cases where the cost of house cleaning will be deducted no matter how clean the room is.
Therefore, it is important to check this carefully when signing the contract. The standard rate is one to two months' rent.
Please take a look at the following article for more details on deposits.
What is a rental deposit used for? Explaining the average initial cost and refund when moving out
Key money (money paid to the landlord as a token of appreciation)
Key money is money paid to the landlord as a token of appreciation when signing a lease.
Key money is given as a token of appreciation, and is not returned when you move out, nor can it be used to cover house cleaning fees or restoration costs.
In the Kanto region, it is common for key money to be given together with the deposit, and the average amount is one to two months' rent.
In some cases, there is no key money, but instead there is a system called "shikibiki" which has a similar effect.
In western Japan, it is common to pay a deposit equivalent to several months' rent when signing a contract instead of a security deposit or key money.
When you move out, a non-refundable deposit is deducted from the security deposit as a reward. More details will be provided later.
Please take a look at the following article for more details on key money.
The difference between rental security deposit and key money
Now that you understand what a deposit and key money are, we will explain how they differ from a guarantee deposit.
The main differences between the rental deposit and key money are as follows:
- There is a large difference in the price range
- Whether or not it will be returned depends on the room when you move out.
There is a big difference in price range
The average rental deposit, security deposit and key money rates are as follows:
| Deposit | 3 to 6 months' rent |
| Deposit | 1-2 months' rent |
| key money | 1-2 months' rent |
The deposit, which is common mainly in the Kanto region, is paid together with the key money.
Therefore, the average security deposit amount, which is 3 to 6 months' rent, tends to be higher than the deposit and key money amount, which are at most 4 months' rent.
However, in western Japan, there is no custom of collecting renewal fees at the time of renewal.
Plus, the key money is included in the security deposit, so the longer you stay, the lower the total cost will be.
Whether or not it will be returned depends on the room when you move out.
Whether or not your security deposit will be returned will depend on the condition of the room when you move out.
In the case of a security deposit, it will generally be returned unless the tenant is in arrears with rent or has caused any damage intentionally or accidentally.
On the other hand, with a security deposit, the amount paid at the time of signing the contract will be deducted and the remainder will be returned to you regardless of how you use the room.
However, if the cost of restoring the property to its original condition exceeds the deposit amount, the difference will be deducted from the remaining deposit, and you may not get much of it back.
In addition, be aware that if the cost of restoring the property to its original condition exceeds the security deposit, you may be charged an additional fee.
Regarding the amount of the security deposit to be returned
Next, we will explain the amount of the security deposit that will be refunded and the deposit deduction.
The amount you deposit with the landlord as a security deposit will be returned when you move out, but various amounts will be deducted.
First, let me explain the "deposit" part.
What is a deposit?
A deposit deduction is a special agreement that comes with a security deposit, which means that a certain amount of the deposit will not be returned unconditionally.
The money is intended as a reward or to cover restoration costs, and will not be returned when you move out, even if the restoration costs are zero yen.
In other words, although the purpose for which it is used is different, it can be thought of as being roughly the same as a key money as it is an initial cost that will not be refunded.
The standard rate for a deposit is said to be around 50 to 60 percent of the security deposit.
There are also cases where a specific amount is set, such as "a certain number of months' rent" or "a certain tens of thousands of yen regardless of rent."
The amount you get back when you move out will vary greatly depending on the amount of the deposit. Therefore, it is important to check it carefully when signing the contract.
The amount of the security deposit to be returned
The security deposit will be used to cover restoration costs and unpaid rent.
The deposit, minus these costs, will be returned to you when you move out.
However, the security deposit often comes with a special clause called the "deposit" mentioned earlier, and you should understand that the fixed amount agreed upon as the deposit will not be refunded.
If rent is not paid, the deposit will be deducted from the rent and the amount will be returned.
In other words, if the rented room has not been damaged or soiled intentionally or accidentally by the tenant, and there is no unpaid rent, it will generally be returned to you.
What is the tenant's obligation to restore the property to its original condition?
So, you may be wondering in what cases you will need to pay the costs of restoring the property to its original condition and having them deducted from your security deposit.
In particular, when it comes to restoration to the original state, problems often arise due to differences in interpretation.
So, next I will explain in detail about the restoration.
When moving out, tenants have the obligation to return the property to its original condition.
The scope is clearly stated in the revised Civil Code that came into effect on April 1, 2020, as follows:
"The tenant is obligated to restore the property to its original condition for any damage that occurs after receiving the property, but is not obligated to restore the property to its original condition for normal wear and tear or changes that occur over time."
In other words, the extent to which the tenant is obligated to restore the property to its original condition is only those parts of the rented room that have been damaged or soiled intentionally, carelessly, or negligently.
Now, we will introduce the scope of the obligation to restore property to its original condition, as well as specific examples of normal wear and tear and changes over time (which are not subject to the obligation to restore property to its original condition).
Restoration obligation (tenant's responsibility)
The specific scope of restoration is as follows:
- Stains and mold caused by spilling drinks on the carpet
- Rust marks under the refrigerator
- Scratches caused by moving, rearranging, etc.
- Discoloration and corrosion of tatami mats and flooring caused by carelessness such as rainwater blowing in
- Intentional defacement such as graffiti
- Smells such as tobacco tar
- Nail holes and screw holes in walls, etc.
- Damage and odors caused by pets
Any damage or dirt caused by the tenant's negligence or other reasons that would not occur in normal daily life is subject to the obligation to restore the property to its original condition.
On the other hand, what are the cases of normal wear and tear and changes due to aging that are not subject to the obligation to restore the property to its original condition?
Not subject to the obligation to restore the property to its original condition (landlord is responsible)
The specific scope of normal wear and tear and changes due to aging that are not subject to the obligation to restore the property to its original condition is as follows:
- Discoloration of wallpaper and tatami mats due to natural phenomena such as sunlight
- Dents in floors and carpets caused by furniture placement
- Black spots on the rear walls of televisions, refrigerators, etc. (electricity burns)
- Screw holes and marks on the wall caused by the installation of an air conditioner owned by the tenant
- Remains of posters and pictures on the wall (to the extent that replacement of the base board is not necessary)
This means that the tenant has no obligation to restore the property to its original condition in the case of normal wear and tear such as scratches and dirt that arise from normal living, or deterioration that occurs over time regardless of whether the property is occupied or not.
Timing of deposit return
Regarding the timing of the return of the security deposit, just like the obligation to restore the property to its original condition, the revised Civil Code that came into effect on April 1, 2020, states the following:
"When the lease ends and the leased item is returned"
In other words, the deposit will be returned when the rental contract ends and the property is vacated.
It is often thought that the deposit is returned when you move out, but this is only possible once the property has been vacated.
Generally, the deadline for return is within one to two months of moving out.
If the contract does not specify a return deadline, it is a good idea to expect the item to be returned within two months of moving out.
Two ways to avoid reducing your security deposit return
Now that you know the amount, timing, and deadline for your deposit to be returned, if you are going to have your deposit returned anyway, you'll want to get as much of it as possible.
Next, we will introduce two ways to avoid reducing the amount of your security deposit refund.
There are two main ways to avoid reducing the amount of your security deposit refund in a rental contract:
- Negotiating a reduction in the deposit
- Reduce restoration costs
I will explain each one.
Negotiating a reduction in the deposit
If the deposit amount is more than 3.5 months' rent, try to negotiate for a reduction.
The basis for this is a precedent (Supreme Court precedent in 2011) in which the validity of the deposit special clause was disputed. Please see the following precedent.
In this case, the tenant's argument was not accepted.
The so-called security deposit clause attached to the lease contract for a residential building, which is a consumer contract, provides for the deduction of a so-called security deposit of 180,000 to 340,000 yen depending on the period that has elapsed between the conclusion of the lease contract and the vacating of the property, from the security deposit. The amount of the security deposit is just under two to just over 3.5 times the monthly rent, and the tenant is not obligated to pay a lump sum such as a key money, except for the obligation to pay a renewal fee equivalent to one month's rent when the lease contract is renewed. Based on these facts, the amount of the security deposit cannot be considered to be too high, and it cannot be deemed invalid under Article 10 of the Consumer Contract Act.
Source: Courts in Japan
There are two key points in this judgment.
- The deposit must be no more than 3.5 times the rent (3.5 months' rent)
- There was no obligation to pay any lump sums such as key money other than the renewal fee.
In other words, if the total of the deposit and any lump sum payments such as key money is more than 3.5 months' rent, it is considered to be a high amount.
There is no legal limit on the amount of the deposit, but if we use this Supreme Court precedent as a benchmark, it can be said that you can negotiate a reduction in the deposit if it is 3.5 months' rent or more.
First, try negotiating.
Reduce restoration costs
The surest way is to keep restoration costs to a minimum.
The amount of the security deposit that will be returned will be the remaining amount after deducting the deposit and restoration costs.
The deposit is intended to cover restoration costs, so if the amount of restoration required exceeds the deposit amount, the difference will be deducted from the remaining deposit.
That is why it is important to keep the room in good condition and limit restoration costs to just the deposit.
For example, unavoidable changes over time, such as fading of flooring due to sunlight, are not caused by intention or negligence and are therefore the responsibility of the landlord.
However, any other damage or stains caused intentionally or carelessly, or excessive dirt due to neglecting to clean, will be the responsibility of the tenant, so please be careful when using the property.
[Finally] Security deposit and security deposit are similar but not the same
In this article, we have discussed rental security deposits.
The summary of the guarantee is as follows:
- A security deposit is a lump sum that is paid to the lender as collateral.
- In many cases, the security deposit comes with a special clause.
- The amount of the security deposit returned will vary depending on the deposit amount and restoration costs.
- The deposit will be returned when the property is vacated.
- The deposit is returned within 2 months of moving out.
In addition, security deposit and deposit are the same in the sense that they are money that you deposit with the landlord when you move in.
However, there is a difference in the nature of a security deposit that is refunded in full if restoration to the original condition is not required, and a security deposit that comes with a security deduction that is unconditionally non-refundable.
Therefore, be sure to fully understand the nature of the security deposit and deposit, and be sure to check them when signing a rental contract.
