Differences from Types of Lease Agreements

Regular Rental Agreement and ​Lease Agreement (Fixed Term Building Lease Agreement)

Suppose you made a purchase of a vacant house by investing in real estate. The real estate needs to be newly rented. Generally, a management company is selected to assess rent, determine conditions, and start a new rental application. The first thing we would like owner to consider in the rental application is to decide how you plan to use the real estate in the future. There are two types of lease contracts. For example, if you do not plan to live in the future and intend to continue lending, you will have a regular rental agreement (ordinary lease contract). Or, if you intend to return and live someday, if you want to make sure that the renter moves out, a ​lease agreement（fixed term building lease agreement） that ensures the end of the contract is an option.

Today, we will explain about Regular Rental Agreement and Lease Agreement (Fixed Term Building Lease Agreement).

Differences from types of lease agreements

How do you want to rent your real estate? Even with the contract method, each has its advantages and disadvantages. It is important to make a decision after considering the characteristics and circumstances of each property. ​When deciding the contract period, you need to understand the “Regular Rental Agreement” and the Lease Agreement (Fixed Term Building Lease Agreement). There are differences between the two not only in the contract period but also in cancellation, and each has its own characteristics.

Contract Method

Regular Rental Agreement	Lease Agreement ​(Fixed Term Building Lease Agreement)
According to civil law, it can be written or verbal, but in general, the contract is in writing.	[1] Limited to written contracts (certificates, etc.). [2] In addition to the contract, the owner must explain in writing in advance that "there is no renewal and it will end when the period expires".

Contract Renewal

Regular Rental Agreement	Lease Agreement ​ (Fixed Term Building Lease Agreement)
It can be renewed if the Lessee wishes.	There is no renewal. ​ (Can be re-contracted by mutual agreement)

Contract Term

Regular Rental Agreement	Lease Agreement ​ (Fixed Term Building Lease Agreement)
[1] Contracts for less than one year have no fixed term. [2] The maximum period is unlimited. (20 years before March 1, 2000)	You can set it freely. [1] Contracts of less than one year are possible. [2] The maximum period is unlimited.

Cancellation from the Owner

Regular Rental Agreement	Lease Agreement ​ (Fixed Term Building Lease Agreement)
Cancellation is not possible without Fair Reason*.	For contracts of one year or longer, Lessor must notify the lessee of termination within one to six months of expiring the contract. If you fail to do this, you will not be able to terminate the Lease Agreement (Fixed Term Building Lease Agreement) from the Lesser side for 6 months from the date of notification.

Possibility of Early Termination from the Lessee

Regular Rental Agreement	Lease Agreement ​ (Fixed Term Building Lease Agreement)
According to special provisions. *As a general rule, it is possible by applying from Lessee one month in advance.	[1] Possible by special contract. [2] Regardless of the special contract, if it becomes difficult to use it as the home of tenants life due to unavoidable circumstances such as transfer, medical treatment, care of relatives, etc., Lessee can apply for cancellation one month in advance. (200 m2 or more residential/business buildings) According to special contract.

*Fair Reason is limited to situations where there is an unavoidable social common sense, such as when a building has been obsolete and has to be rebuilt.
*You cannot change the contract type during the lease term.

The above is the difference between Regular Rental Agreement and Lease Agreement (Fixed Term Building Lease Agreement). If you want to use your own building in the future when renting, it is effective to select ​Lease Agreement (Fixed Term Building Lease Agreement). However, looking at the percentage of contracts, Regular Rental Agreement occupies 97.5% and Lease Agreement (Fixed Term Building Lease Agreement) is only 2.3%. ​Lease Agreement (Fixed Term Building Lease Agreement) is an unfamiliar contract type and there is a possibility that you may be refused to use it.
​If you choose Lease Agreement (Fixed Term Building Lease Agreement), you can guarantee the initial contract for 2 years, the renewal contract for 2 times, and the total lease period of 6 years. It is also an effective way for the tenant to apply for the contract under conditions that make it easy to sign the contract.

If you are considering a real estate investment, please feel free to contact us for rent recruitment and management methods.