Important Points to keep in mind until moving in.
After signing the contract, you should know about the points to check and the process of delivery.
Point 1: Pre-move-in viewing to check the finish.
Newly built houses
In the case of a newly built house, a preview is held to check the finishes of the completed house before delivery. Here are two points to check.
The first thing to check is that the finishes are in accordance with the contract and specifications. Make sure that the interior materials, fittings, housing equipment, etc. are in accordance with the contract.
Next, check the "state of finishes. Check to see if the fittings open and close smoothly, if the edges and joints of the walls, flooring, ceilings, etc. are properly treated, and if there are any scratches. If any defects are found, request that they be repaired before the delivery.
If there are no problems, the preview ends with the signing and sealing of a document stating that you have checked the condition of the house and its finishes. However, once you have signed and sealed the document, responsibility for any problems that may be pointed out afterwards tends to become ambiguous. Before signing and sealing the documents, make sure to check them thoroughly at the preview.
In the case of an existing house, in some cases, the seller or the real estate company will be present to check the site before the delivery date. Make sure that the condition of the property is in accordance with the terms of the contract, such as whether the promised repairs, etc. have been completed and whether there are any incidental facilities that are to be taken over. If the seller has given you a notice (report on ancillary facilities and property condition), check based on it
Point 2: What if there is a delay in moving or some other discrepancy with the terms of the contract?
It is possible that the construction period will be extended and the property will not be completed by the delivery date, that the seller who is residing in the property delays moving out, or that the vacating of the property is delayed due to the delay in the vacating process of the property where the tenant is moving, etc., In such cases, the property will not be delivered according to the contract. As a buyer, you will be in trouble as well, as you have already made arrangements to move out and have a fixed date to vacate the rental housing in which you are living.
Thus, if delivery cannot be made by the date agreed upon in the contract and there is no prospect of delivery at all, one option would be to claim cancellation of the contract on the grounds of the seller's default of contract (breach of promise). If you find that the seller is in default (not executing the contract), not limited to a delay in delivery, you need to determine whether the seller is likely to be able to execute what was promised in the contract and whether the other party is responding in good faith, and then decide whether to take practical measures such as postponing delivery or canceling the contract.
On the other hand, if there is a slight delay in delivery, measures such as compensation for expenses incurred due to the delay in delivery may be considered. First, consider how to respond to the situation with the real estate company.
Point 3: Settle the balance at the time of delivery
Upon delivery, the buyer prepares the balance due, various expenses, and necessary documents. Before the time of delivery, please check with the real estate agency to ensure that nothing has been left out.
Items to be provided by the buyer at the time of delivery
(1) Examples of money to be prepared
(2) Examples of required documents to be prepared
If the remaining balance is to be covered by a mortgage, preparations for loan execution should not be neglected. The seller, buyer, real estate company, financial institution representative, judicial scrivener, and other related parties will be present at the delivery of the property.
Then, generally, the loan is executed, the balance is settled, and application for registration (cancellation of the seller's mortgage, transfer of ownership from the seller to the buyer, and establishment of the buyer's mortgage) are made at the same time. If any one of these procedures is incomplete, there is a risk that the settlement of the balance and delivery of the property will not be completed, so it is important to pay close attention to these procedures.
After the settlement of the balance is completed, the buyer will receive the keys and the delivery will be completed.
Settlement and Delivery Process
Regulations When the Seller Is a Real Estate Agent
When a real estate company (real estate agent) is the seller, the following restrictions are set in the sales contract.
(1) Restrictions on contracts for properties that have not yet been complete
Permission or confirmation, etc. (hereinafter referred to as "permits, etc.") from an administrative agency is required for the creation of land or construction of buildings above a certain size. Without these permits, land cannot be developed or buildings cannot be constructed. Therefore, a real estate company (real estate agent) cannot conclude a sales contract for an uncompleted property for which land development or building construction has not yet taken place prior to obtaining the permits, etc. from the administrative agency. When conducting sales and purchases of uncompleted newly built properties for sale, confirm that permits, etc. are in place.
When a real estate company (real estate agent) is the seller, cooling-off (unconditional cancellation of contract, etc.) is applicable to the buyer if certain conditions are met. The requirements are as follows. Check whether the cooling-off is applicable to your contract.
(3) Restrictions on deposits
When a real estate company (real estate agent) receives a deposit, the following restrictions apply, so please make sure to check them carefully.
(4) Protection of deposits, etc.
When a real estate company (real estate agent) receives a deposit or a portion of the sales price (hereinafter referred to as "deposit, etc.") exceeding a certain amount at the time of concluding a sales contract, the company must take measures to protect the deposit, etc. The security measures are a guarantee by a bank or a guarantee company, etc., or insurance by an insurance company. This means that even in the unlikely event that the real estate company (real estate agent) goes bankrupt, the deposit, etc. paid at the time of signing the contract will be returned. Check to see if the amount of the deposit, etc. to be paid is covered by the protection measures.
The amount of deposit, etc. subject to protection
*For an amount that is not listed above, the protective measures are optional.
(5) Restrictions on the amount of scheduled compensation for damages
A real estate company (real estate transaction agent) may not conclude a contract in which the total amount of the penalty or scheduled amount of compensation for damages in the event of a breach of contract exceeds 20% of the sales price. If this is violated, the portion exceeding 20% will become invalid, and the total amount of the penalty and scheduled amount of compensation for damages will be 20% of the sales price.
(6) Limitations on provisions regarding liability for non-conformity to the contract
Even if a real estate company (real estate agent) makes a provision less favorable to the buyer than the provisions of the Civil Code regarding liability for non-conformity to contract, the provision will be invalid. However, a provision stating, "We will assume responsibility only if we are notified within two years from the date of delivery. is valid, although it is less favorable to the buyer than the provisions of the Civil Code. In case the provision is invalid, the principle provisions of the Civil Code will be applied.
Regulations when the seller is a real estate agent
In case the property is a newly built house
The seller of a newly built house must assume liability for defects (liability for nonconformity to the contract) of the main structural parts (foundation, pillars, roof, exterior walls, etc.) for at least 10 years from the date of delivery. If the property to be purchased is a newly-built house, please confirm the period and details of the liability for defects carefully. In order to ensure the fulfillment of liability for defects, the seller is obliged to subscribe to insurance or deposit a security deposit. It is important to confirm what measures will be taken for the new house you are planning to purchase.
Points to Check When Concluding a Sales Contract
Since a real estate sales contract is a major transaction involving high-value assets, a written contract is generally prepared and exchanged. The Real Estate Brokerage Act also obliges real estate companies (real estate agents) to deliver a document describing the contents of the contract without delay after the contract is concluded, with the real estate agent's name and seal affixed.
The revised part of the Real Estate Brokerage Act of the Digital Improvement Act took effect on May 18, 2022, making the seal of a real estate transaction agent unnecessary when a paper document is delivered upon conclusion of this contract, and also making it possible to provide the document digitally.
This section describes the main points that should be confirmed in a sales contract. There are, of course, other points that should be confirmed, so if you have any questions, be sure to check with your real estate agent until there is no uncertain points left.
Point 1: What to check in a sales contract
The following is a list of common items in a sales contract and points to be checked. However, keep in mind that the details of the contract and the points to be checked will vary depending on the individual contract.
(1) Description of the property for sale
Check for any errors in the description of the property to be purchased. Generally, the property is indicated in the contract based on the registration record (registry). It is a prerequisite of the sales contract that the property to be sold or purchased is clearly defined.
(2) Sales price, amount of deposit, and payment date
Confirm the amount of the sales price, deposit, etc. and the date of payment. Note that failure to pay by the due date may constitute a breach of contract. Also, carefully check the handling of the deposit. Confirm what kind of deposit (cancellation deposit, deed of promise, or penalty deposit) it is and whether the amount is appropriate (approximately what percentage of the purchase price it is). If the deposit is a cancellation deposit, check how long it is possible to cancel the contract. If there are any concerns about the seller's credibility, the buyer should proceed with caution when paying a large deposit or other such payment.
(3) Actual measurement of land and settlement of land price
The area of land may differ from the area indicated in the registration record (registry) to the actual area. Therefore, the seller often measures the actual area of the land before delivery. If, as a result of the actual measurement, the area of the registration record (registry) differs from the area actually measured, the sales price may be settled according to the difference in area. (It is also possible to only take the actual measurement and not to settle the price.) Generally, the settlement of the sales price is made using the unit price per square meter based on the original sales price and the original sales area (the area on the registration record (registry)).
(4) Transfer of ownership and delivery
Confirm the timing of transfer of ownership and delivery. Check if there are any problems based on the schedule for moving, etc. While the transfer of ownership and delivery take place in exchange for payment of the price, in practice, real estate transactions are often completed when the documents necessary for the registration of transfer of ownership and the keys are handed over to the buyer at the place of payment.
(5) Transfer of auxiliary facilities, etc.
In the case of an existing house, it is necessary to clarify the transfer of facilities such as interior lighting and air conditioning, as well as garden trees and garden stones on the premises. Troubles surrounding the taking over of such auxiliary facilities and equipment are surprisingly common, so it is necessary to fully discuss with the seller what will be taken over and what will be removed prior to signing the contract.
It is also important to confirm in advance the condition of the equipment to be taken over, including whether it is in disrepair. When signing a contract, it is common to check each item of equipment one by one using a list of ancillary equipment, etc. (The list used confirm the conditions of the ancillary equipment is called a "notice" or "property condition report.)
(6) Discharge of Burdens
Confirm that the property to be purchased will be acquired with full title. For example, the property with any rights that would prevent the full exercise of ownership, such as mortgages or leasehold rights, will be delivered with the seller's responsibility to remove such rights. Note that if the property is delivered without such rights being removed, it may not be available for use as planned after purchase.
In the sale of investment properties, it is often the case that the property is occupied by tenants, in which case only the lease agreement with the tenants will be taken over by the buyer. In this case, it is necessary to clarify the rights to be taken over and the rights not to be taken over.
(7) Settlement of taxes and public dues, etc.
In a real estate sales contract, it is common for the seller and buyer to settle taxes and public dues such as fixed property tax and city planning tax. In addition, other expenses such as management fees may also be settled. Settlements are often made on a pro-rata basis based on the date of delivery. Settlement fees such as these are also required separately from the sales price, so it is important to confirm the details.
(8) Cancellation by forfeit
Since the contract may be cancelled due to some unforeseen circumstances, the parties concerned should confirm what kind of arrangements are in place for cancellation by forfeit. Of course, by agreement between the parties, it is possible to make a contract that does not allow for the release of a deposit, or to limit the period during which the deposit can be released.
The amount of the deposit is generally set within the range of up to 20% of the purchase price. If the deposit is small, the burden is small when you cancel the contract, but the risk of cancellation by the other party is high. On the other hand, if the deposit is large, the risk of cancellation by the other party is low, although the burden is greater when you terminate the contract. Be sure to check the amount of the cancellation deposit as well.
(9) Loss or damage to the property prior to delivery (burden of risk)
This is an arrangement in the event that the property to be purchased is lost or damaged after the conclusion of the sales contract for reasons for which neither the seller nor the buyer is responsible, such as the total destruction of the building due to a natural disaster.
In a real estate transaction, the seller generally restores the property before handing it over. However, if the restoration of the property will cost an excessive amount of money, or if the buyer cannot achieve the purpose of the contract because the property has been lost or damaged (for example, it cannot be restored to a livable condition), the contract can be terminated unconditionally. This is an arrangement in case of emergency, so be sure to check it carefully.
(10) Cancellation for breach of contract except for nonconformity
This is an arrangement for canceling a contract due to breach of contract (i.e., breach of promise, which is legally called "default"). If either the seller or the buyer is in default, the other party can cancel the contract. If the contract is cancelled due to a breach of contract, the party who breached the contract generally pays a penalty. In many cases, the penalty, etc. is generally set within the range of up to 20% of the sales price. Although a sales contract is not concluded on the assumption that the contract will be violated, there are contingencies, so be sure to check the contract carefully in advance.
(11) Exclusion of Anti-Social Forces
In order to "exclude antisocial forces" from real estate transactions, standard model clauses for exclusion of antisocial forces have been introduced. Confirm that the sales contract includes clauses assuring that "neither the seller nor the buyer is a crime syndicate or other anti-social force" and "the property will not be used as an office or other base of activities of anti-social forces. If any of these are violated, the contract can be terminated.
(12) Loan provisions
If the buyer is unable to obtain a mortgage loan despite the fact that he/she is not at fault, the buyer will not be able to pay the purchase price and will ultimately be in breach of the contract. Since the buyer should avoid such a situation, it is common for the buyer to attach a loan provision to the purchase agreement when purchasing a house with a mortgage loan. The buyer can unconditionally cancel the sales contract in the event that the mortgage loan review is unsuccessful.
However, this provision does not apply if the buyer is unable to obtain a loan due to the buyer's fault, for example, if the buyer fails to follow the necessary procedures for loan approval. Even if a loan provision is in place, it is important to fully consider the financial plan before signing the contract and to have a good prospect of obtaining a loan. Please note that in some cases, additional optional construction works or specification changes in newly built condominiums may not be covered by the loan provision.
(13) Liability for nonconformity to the contract
If there is a defect in the property sold or purchased, the buyer can make certain claims against the seller. The seller's liability in this case was previously referred to as "defect liability. However, due to an amendment to the Civil Code, the name has been changed to "liability for nonconformity to the contract" as of April 1, 2020, and its contents have also changed significantly.
The seller is obligated under the sales contract to deliver the property that conforms to the terms of the contract with respect to the type, quality, and quantity of the property. If the seller fails to fulfill this obligation and delivers the property, he or she is liable for nonconformity to the contract. In such a case, according to the provisions of the Civil Code, the buyer can demand repair of the property, reduction of the price, or compensation for damages, and can cancel the contract if the non-conformity is not minor. However, this provision of the Civil Code is a general rule when the parties have not made any agreement, and the parties may make other arrangements.
In actual contracts, special provisions are usually made regarding the extent to which the seller is liable for nonconformity and the period for which the seller is liable. Therefore, as a buyer, you should carefully check the contents of the contract regarding the extent to which the seller is liable and the period of time for which he/she can make a claim.
If a building condition survey has been conducted and a summary of the results is explained as an important matter before a contract is signed, the summary of the survey results will be included as "matters confirmed by both parties regarding the condition of the main structural members of the building, etc." (If a building condition survey has not been conducted, it will be indicated as "none.")
Point 2: Regulations when the seller is a real estate company (real estate agent)
When a real estate company is the seller, the Real Estate Brokerage Act sets restrictions on sales contracts. If applicable, please check the contents of the contract and make sure in advance that the contract does not violate any restrictions before signing the sales contract.
Point 3: Learn about the sales contract process
After receiving an explanation of important matters and being satisfied with the contents of the contract and the property, it is time to conclude the sales contract.
In principle, the buyer and seller will meet to read out the sales contract and make a final confirmation of the contents of the contract. The contract is then signed and sealed, and the deposit, etc. is paid. The deposit, etc. may be prepared in cash, by wire transfer to a designated account, or by deposit check.
If a real estate company acts as an intermediary, a brokerage fee is often paid at the time of contracting. If there is oversight in the contract procedures, a sales contract cannot be concluded, which will cause inconvenience to the seller and other parties involved, so be sure to be well prepared before signing the contract.
In real estate transactions, the Law for Prevention of Transfer of Criminal Proceeds requires the seller or the real estate company acting as an intermediary to present identification documents and to declare the seller's occupation and the purpose of the transaction.
Main items required at the time of signing
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