10-1 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.
Existing houses
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
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.
Existing houses
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.
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.
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
- The balance of the property price
- Settlement of property tax and city planning tax
- Settlement of utility charges, etc.
- Settlement of management fees, etc.
- Registration fees (registration and license tax, fees to judicial scriveners, etc.)
- Balance of brokerage fees paid to the real estate company
(2) Examples of required documents to be prepared
- Certificate of residence (for application for registration)
- A letter of attorney (for application for registration)
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
10-2 Procedures for the Mortgage Tax Credit Program
If you purchase a house using a mortgage loan, you may be eligible for the mortgage tax reduction program (generally known as the "mortgage deduction"). However, there are certain conditions regarding the purchased home and loan that must be met in order to be eligible for the program, so be sure to check them carefully.
Point 1: System Overview and Tax Returns
If you use a mortgage loan to build or acquire a house (including the land acquired together with the house) or to make certain additions or renovations, a certain amount calculated based on the year-end loan balance will be deducted from your income tax and inhabitant tax. However, in order to receive the deduction, both company employees and self-employed persons must apply for the deduction on their tax returns.
For company employees, a tax return must be filed for the first year, but from the second year onward, a refund can be received through the year-end adjustment at the employer.
If you use a mortgage loan to build or acquire a house (including the land acquired together with the house) or to make certain additions or renovations, a certain amount calculated based on the year-end loan balance will be deducted from your income tax and inhabitant tax. However, in order to receive the deduction, both company employees and self-employed persons must apply for the deduction on their tax returns.
For company employees, a tax return must be filed for the first year, but from the second year onward, a refund can be received through the year-end adjustment at the employer.
Point 2: Mortgage Deduction Procedure Flow and Required
In order to receive the mortgage deduction, you must file an income tax return in the year following the year you move in and submit documents such as a withholding tax certificate (for company employees) and a copy of your residence certificate. In addition, a statement of calculation must be prepared when filing the return, so please obtain and confirm your tax return and other documents as soon as possible.
In order to receive the mortgage deduction, you must file an income tax return in the year following the year you move in and submit documents such as a withholding tax certificate (for company employees) and a copy of your residence certificate. In addition, a statement of calculation must be prepared when filing the return, so please obtain and confirm your tax return and other documents as soon as possible.
Documents required for mortgage deduction and where to obtain them
10-3 Dealing with Problems Related to Defects in the Property after Moving in
After purchasing a house, troubles over defects in the property may occur.
In order to deal with such problems properly, it is important to have a good understanding of the contents of the sales contract, as well as the related legal system, insurance, after-sales service, warranty system, etc.
In order to deal with such problems properly, it is important to have a good understanding of the contents of the sales contract, as well as the related legal system, insurance, after-sales service, warranty system, etc.
Point 1: Meaning and Duration of Liability for Contractual Nonconformity
When there is a defect in the purchased house, such as a leak or corrosion caused by ants, it was previously called a "defect," and the seller's liability for such defects was called "defect liability. However, the amendment to the Civil Code, which came into effect on April 1, 2020, has substantially revised not only the name of this liability but also its content. The revised Civil Code is based on the premise that the seller is obligated to deliver a property that conforms to the terms of the contract with respect to "type, quality, and quantity" of the subject property of the sale, and if the seller delivers a property that does not conform to the terms of the contract with respect to those items, the seller's liability will be default liability. For example, if the seller delivers a building that leaks or is corroded by white ants, he is in default of his obligation to deliver a property that conforms to the terms of the contract with respect to quality.
When there is such a nonconformity in the subject matter of the contract (the object), the buyer can demand that it be repaired, and when the seller does not do so even after such a demand, or when the repair itself is impossible, the buyer can demand a reduction of the purchase price. In addition, under the general principle of default, a claim for compensation for damages can be made, and the contract can be terminated. However, compensation for damages cannot be claimed if the seller is not responsible in any way. Cancellation is also not allowed when the nonconformity is minor.
Regarding the period during which the seller must assume this responsibility, the Civil Code considers it unreasonable for the seller to assume responsibility for nonconformity for a long period of time and, because it is appropriate to resolve disputes arising from sales as early as possible. The buyer must notify the seller within one year from the time when he/she becomes aware of the nonconformity.
Special arrangements
This provision of the Civil Code is an optional provision, meaning that it can be changed or modified at will, so another provision (covenant) can be made by a special agreement between the parties. Particularly in the case of existing houses (used houses), it is very difficult or impossible to determine whether a certain result or other event constitutes nonconformity to the contract due to age-related deterioration, natural wear and tear, etc. Therefore, in general transactions, the scope of the seller's liability is specified or the period of liability is shortened. In some cases, there may be a covenant that the seller is not liable at all. Even in such cases, the seller is not exempt from liability if he knew of the nonconformity and did not inform the buyer of it, but otherwise he is exempt from liability as per the covenant.
When a real estate company is the seller
In cases where a real estate agent is the seller and the buyer is not a real estate agent, a covenant under the Real Estate Brokerage Act to the effect that the seller is liable for non-conformity to the contract only if the seller is notified within two years of the date of delivery is valid. However, other covenants that are more disadvantageous to the buyer than the provisions of the Civil Code, such as "limited to a claim for repairs" or "the contract can be terminated only if the seller approves", are invalid.
When the seller is a corporation and the buyer is an individual consumer
When the seller is a corporation and the buyer is an individual consumer, all legal entities such as corporations, even if they are not real estate companies, are "corporations" under the Consumer Contract Act. In a contract in which a corporation is the seller and sells to an individual consumer, a contract clause stating that "the corporation shall not be liable for nonconformance with contract" is considered invalid under the Act.
(1) The legal system for liability for defects of newly built houses
In the case of a newly built house, the following laws protect the buyer. Even if the seller is bankrupt or the seller does not have the resources to pay for damages, the necessary expenses will be paid through insurance or warranty refund.
Under the Housing Quality Assurance Law, the seller, etc. who has delivered a newly built house is obligated to assume liability for defects* concerning the major structural components of the house (foundation, foundation, columns, diagonal materials, etc.) and the parts that prevent rainwater infiltration (roof, exterior walls, doors of openings, etc.) for 10 years after the delivery. Therefore, for these defects, it is possible to claim for repair of the property, compensation for damages, or cancellation of the contract (cancellation of the contract is limited to sales contracts and serious defects) for 10 years after the delivery.
*The Law, even after the revision of the Civil Code, refers to contractual nonconformity as "defects."
Under the Housing Defects Liability Enforcement Law, the seller of a newly built house is obligated to "purchase insurance" or "deposit a security deposit" to ensure that the seller is liable for defects*. Under this system, even if the seller becomes unable to assume liability for defects due to bankruptcy or other reasons, the seller is required to fulfill its liability to consumers through insurance or a deposit of security money deposited in advance.
*The Housing Defects Liability Enforcement Law and the Civil Code, since amended, still refer to contractual nonconformity as "defects."
(2) Points to keep in mind concerning used houses
In the case of a used house, there is no system like that of a newly built house, so the seller's liability for defect warranty is based on the contract. If the seller is a real estate company that is a registered real estate broker, it is liable for non-conformity to the contract for at least a certain period of time, but if the real estate company goes bankrupt, etc., it is highly likely that the seller will not be able to seek repair or other measures. In addition, if the seller is an individual, there are many contracts that shorten the period of liability for non-conformity to the contract.
Therefore, in the case of used properties, it is important to thoroughly check the property before signing a contract to identify any defects in advance. For this reason, recently, due in part to the revision of the Real Estate Brokerage Act, there has been an increase in the number of cases where inspections (building condition surveys) are requested to check the building condition in advance.
When there is a defect in the purchased house, such as a leak or corrosion caused by ants, it was previously called a "defect," and the seller's liability for such defects was called "defect liability. However, the amendment to the Civil Code, which came into effect on April 1, 2020, has substantially revised not only the name of this liability but also its content. The revised Civil Code is based on the premise that the seller is obligated to deliver a property that conforms to the terms of the contract with respect to "type, quality, and quantity" of the subject property of the sale, and if the seller delivers a property that does not conform to the terms of the contract with respect to those items, the seller's liability will be default liability. For example, if the seller delivers a building that leaks or is corroded by white ants, he is in default of his obligation to deliver a property that conforms to the terms of the contract with respect to quality.
When there is such a nonconformity in the subject matter of the contract (the object), the buyer can demand that it be repaired, and when the seller does not do so even after such a demand, or when the repair itself is impossible, the buyer can demand a reduction of the purchase price. In addition, under the general principle of default, a claim for compensation for damages can be made, and the contract can be terminated. However, compensation for damages cannot be claimed if the seller is not responsible in any way. Cancellation is also not allowed when the nonconformity is minor.
Regarding the period during which the seller must assume this responsibility, the Civil Code considers it unreasonable for the seller to assume responsibility for nonconformity for a long period of time and, because it is appropriate to resolve disputes arising from sales as early as possible. The buyer must notify the seller within one year from the time when he/she becomes aware of the nonconformity.
Special arrangements
This provision of the Civil Code is an optional provision, meaning that it can be changed or modified at will, so another provision (covenant) can be made by a special agreement between the parties. Particularly in the case of existing houses (used houses), it is very difficult or impossible to determine whether a certain result or other event constitutes nonconformity to the contract due to age-related deterioration, natural wear and tear, etc. Therefore, in general transactions, the scope of the seller's liability is specified or the period of liability is shortened. In some cases, there may be a covenant that the seller is not liable at all. Even in such cases, the seller is not exempt from liability if he knew of the nonconformity and did not inform the buyer of it, but otherwise he is exempt from liability as per the covenant.
When a real estate company is the seller
In cases where a real estate agent is the seller and the buyer is not a real estate agent, a covenant under the Real Estate Brokerage Act to the effect that the seller is liable for non-conformity to the contract only if the seller is notified within two years of the date of delivery is valid. However, other covenants that are more disadvantageous to the buyer than the provisions of the Civil Code, such as "limited to a claim for repairs" or "the contract can be terminated only if the seller approves", are invalid.
When the seller is a corporation and the buyer is an individual consumer
When the seller is a corporation and the buyer is an individual consumer, all legal entities such as corporations, even if they are not real estate companies, are "corporations" under the Consumer Contract Act. In a contract in which a corporation is the seller and sells to an individual consumer, a contract clause stating that "the corporation shall not be liable for nonconformance with contract" is considered invalid under the Act.
(1) The legal system for liability for defects of newly built houses
In the case of a newly built house, the following laws protect the buyer. Even if the seller is bankrupt or the seller does not have the resources to pay for damages, the necessary expenses will be paid through insurance or warranty refund.
- The Law for Promotion of Quality Assurance of Housing (hereinafter referred to as the "Housing Quality Assurance Law")
Under the Housing Quality Assurance Law, the seller, etc. who has delivered a newly built house is obligated to assume liability for defects* concerning the major structural components of the house (foundation, foundation, columns, diagonal materials, etc.) and the parts that prevent rainwater infiltration (roof, exterior walls, doors of openings, etc.) for 10 years after the delivery. Therefore, for these defects, it is possible to claim for repair of the property, compensation for damages, or cancellation of the contract (cancellation of the contract is limited to sales contracts and serious defects) for 10 years after the delivery.
*The Law, even after the revision of the Civil Code, refers to contractual nonconformity as "defects."
- The Law Concerning Enforcement of the Liability for Certain Housing Defects (hereinafter referred to as the "Housing Defects Liability Enforcement Law").
Under the Housing Defects Liability Enforcement Law, the seller of a newly built house is obligated to "purchase insurance" or "deposit a security deposit" to ensure that the seller is liable for defects*. Under this system, even if the seller becomes unable to assume liability for defects due to bankruptcy or other reasons, the seller is required to fulfill its liability to consumers through insurance or a deposit of security money deposited in advance.
*The Housing Defects Liability Enforcement Law and the Civil Code, since amended, still refer to contractual nonconformity as "defects."
(2) Points to keep in mind concerning used houses
In the case of a used house, there is no system like that of a newly built house, so the seller's liability for defect warranty is based on the contract. If the seller is a real estate company that is a registered real estate broker, it is liable for non-conformity to the contract for at least a certain period of time, but if the real estate company goes bankrupt, etc., it is highly likely that the seller will not be able to seek repair or other measures. In addition, if the seller is an individual, there are many contracts that shorten the period of liability for non-conformity to the contract.
Therefore, in the case of used properties, it is important to thoroughly check the property before signing a contract to identify any defects in advance. For this reason, recently, due in part to the revision of the Real Estate Brokerage Act, there has been an increase in the number of cases where inspections (building condition surveys) are requested to check the building condition in advance.
Point 2: Understanding after-sales service
In newly built houses*, apart from contractual non-conformity liability, the seller company may provide a voluntary after-sales service to repair certain defects free of charge. Each company has its own standards regarding the types of defects covered by the after-sales service and the duration of the service.
For example, leaks and rainwater leaks involving basic structural components, cracks and damage affecting structural strength, etc., have a 10-year period, the same as under the Housing Quality Assurance Law while damage to walls and malfunctioning equipment often have a 2-5 year period. Recently, some new houses have after-sales service periods of more than 10 years, so it is important to confirm the existence of an after-sales service system and the details of such a system.
*In the case of existing homes, some brokerage firms may offer their own after-sales service, such as repairing certain defects. When selecting a real estate company, be sure to ask about the availability of warranties.
Examples of after-sales service standards (The Japan Association of Realtors)
If any of the ancillary equipment in the newly built house has specified maintenance products as stipulated in the Consumer Products Safety Act, the owner's information should be registered with the manufacturer, etc. immediately after the delivery of the house. In the case of an existing house, if there are specified maintenance products stipulated in the Consumer Products and Product Safety Law in the ancillary equipment you have taken over, provide or change the owner information to the manufacturer, etc. You will receive product safety notices such as inspection notices and recalls.
In newly built houses*, apart from contractual non-conformity liability, the seller company may provide a voluntary after-sales service to repair certain defects free of charge. Each company has its own standards regarding the types of defects covered by the after-sales service and the duration of the service.
For example, leaks and rainwater leaks involving basic structural components, cracks and damage affecting structural strength, etc., have a 10-year period, the same as under the Housing Quality Assurance Law while damage to walls and malfunctioning equipment often have a 2-5 year period. Recently, some new houses have after-sales service periods of more than 10 years, so it is important to confirm the existence of an after-sales service system and the details of such a system.
*In the case of existing homes, some brokerage firms may offer their own after-sales service, such as repairing certain defects. When selecting a real estate company, be sure to ask about the availability of warranties.
Examples of after-sales service standards (The Japan Association of Realtors)
If any of the ancillary equipment in the newly built house has specified maintenance products as stipulated in the Consumer Products Safety Act, the owner's information should be registered with the manufacturer, etc. immediately after the delivery of the house. In the case of an existing house, if there are specified maintenance products stipulated in the Consumer Products and Product Safety Law in the ancillary equipment you have taken over, provide or change the owner information to the manufacturer, etc. You will receive product safety notices such as inspection notices and recalls.
Point 4: Insurance programs for contractual nonconformity liability
*The term "defect" here refers to "non-conformity to contract regarding type or quality" under the revised Civil Code, and the term "liability for defects" will remain in relation to this system even after the Civil Code is revised.
Under the Housing Defect Liability Insurance system, the seller of a newly built house, such as a real estate company, concludes an insurance contract with a housing defect liability insurance company to cover the cost of repairing defects in the event that they are found in the house. If the seller is bankrupt and cannot repair the defects, the buyer can claim the cost of repairing the defects (insurance money) directly from the housing defect liability insurance corporation.
*The term "defect" here refers to "non-conformity to contract regarding type or quality" under the revised Civil Code, and the term "liability for defects" will remain in relation to this system even after the Civil Code is revised.
Under the Housing Defect Liability Insurance system, the seller of a newly built house, such as a real estate company, concludes an insurance contract with a housing defect liability insurance company to cover the cost of repairing defects in the event that they are found in the house. If the seller is bankrupt and cannot repair the defects, the buyer can claim the cost of repairing the defects (insurance money) directly from the housing defect liability insurance corporation.
How the insurance works
Housing defect liability insurance available for used homes
The Existing Home Sales Defects Insurance is a liability insurance program available for existing homes. This insurance is an insurance program that includes an inspection of the existing house and a warranty. The basic performance of the house must pass an inspection by a professional architect. If the seller, a real estate company or an individual, has this insurance, repair costs and other insurance benefits will be paid to the real estate company, inspection agency, or other business (or to the buyer if the business goes bankrupt, etc.) even if defects are found in the used house that has been sold (flood, typhoon, earthquake, eruption, tsunami, fire, white ant insect infestation, natural wear and tear, and improper use of the home are not covered by the policy).
The Existing Home Sales Defects Insurance is a liability insurance program available for existing homes. This insurance is an insurance program that includes an inspection of the existing house and a warranty. The basic performance of the house must pass an inspection by a professional architect. If the seller, a real estate company or an individual, has this insurance, repair costs and other insurance benefits will be paid to the real estate company, inspection agency, or other business (or to the buyer if the business goes bankrupt, etc.) even if defects are found in the used house that has been sold (flood, typhoon, earthquake, eruption, tsunami, fire, white ant insect infestation, natural wear and tear, and improper use of the home are not covered by the policy).