When I signed the lease on my first guesthouse property in Tokyo, I got two surprises in the same afternoon. The first was the size of the upfront check — key money, deposit, agent fee, and guarantor company fee all due before I got the keys. The second, more important one, was a single line buried in the terms: the landlord’s standard lease prohibited subletting entirely, and short-term rental guests count as subletting.

I caught it before signing. Not every operator does. If you’re planning to run a guesthouse, minpaku, or any short-term rental out of a leased property in Japan, the lease negotiation matters as much as the property itself — because the wrong clause can prevent lawful operation at that property, block a proper minpaku notification, or create lease-termination risk even if other licensing work is ready.

TL;DR

  • Many leases in Japan may require separate upfront costs such as key money (礼金), a deposit (敷金), brokerage fees, and a guarantor company fee — amounts vary by property and contract, so budget for each separately rather than as one lump “deposit.”
  • The single most important clause for STR operators is subletting/使用目的 (permitted use) — a standard residential lease does not permit short-term rental use by default.
  • You need the landlord’s explicit written consent for short-term rental or minpaku use, not just silence or verbal agreement.
  • Key money and deposits are negotiable, especially for longer lease terms or when you’re a repeat/known tenant — but permitted-use clauses are usually not negotiable without landlord sign-off from day one.
  • Get the lease reviewed before you file your minpaku notification or apply for a hotel business (ryokan) license — a rejected permitted-use clause can void months of licensing work.

What Is Key Money (Reikin) and How Is It Different From a Deposit (Shikikin)?

Key money (礼金, reikin) is a non-refundable payment to the landlord, while the deposit (敷金, shikikin) is refundable minus deductions for repairs or unpaid rent. Reikin is a non-refundable upfront payment when required by the contract, reflecting Japanese leasing custom rather than a fixed statutory amount — the amount varies by property and market, and it’s increasingly negotiable or waived in competitive markets. Shikikin, by contrast, functions like a security deposit anywhere else: it comes back to you (in part or in full) at move-out, based on the condition of the property and the terms of the lease.

For a commercial or STR-use lease, expect to also see a brokerage (agent) fee and, very commonly now, a guarantor company fee (保証会社). Brokerage fees are capped by law: the total fee a broker collects from landlord and tenant combined is generally capped at one month’s rent plus consumption tax (rent × 1.1), and for residential buildings, the amount charged to either party alone is capped at 0.55 month’s rent including tax unless that party agreed in advance to pay more. Guarantor-company screening is common, especially when the tenant lacks a Japanese personal guarantor or local credit history, but requirements vary by landlord, property type, and lease. Budget for all four line items separately when you’re underwriting a new location; treating them as one rough “deposit” number is how new operators get caught short on move-in cash.

Why Does the Subletting Clause Matter So Much?

The subletting clause matters because a standard Japanese residential lease’s default permitted-use terms do not cover short-term rental, and using the property that way anyway is a lease violation independent of whatever minpaku notification you have filed. Most standard leases specify 使用目的 (purpose of use) as residential occupancy by the named tenant, and separately prohibit 転貸 (subletting) without landlord consent. For a leased dwelling, the minpaku notification process itself requires a lessee to confirm and submit proof that the landlord consents to use involving subletting for a residential lodging business; separately, Civil Code Article 612 prohibits subletting without the landlord’s consent and lets the landlord cancel the lease over unauthorized use by a third party. In practice, that means a paying overnight guest — even for one night — is generally treated as falling under this subletting concept, whether or not you’re the one collecting payment and cleaning between guests.

This is a landlord-relationship issue as much as a legal one. Even where local ordinance allows minpaku operation in a building, an individual landlord can still refuse to permit it under their own lease terms, and may be able to terminate or seek termination of a lease for violating the permitted-use clause even if your business itself is fully licensed — actual termination risk depends on the lease language and facts, so get case-specific legal advice. I’ve seen operators file a minpaku notification with the competent prefectural governor or other authority, generally through the minpaku system, and then get an eviction notice because the landlord never actually signed off on the use — the notification and the lease are two separate matters, and you need both.

How Do You Negotiate Terms as a Foreign Operator?

You negotiate by being upfront about your intended use from the first conversation, not after signing. Landlords who are open to STR use exist — often ones who already have other tenants running guesthouses in the same building, or agents who specialize in investment/commercial leasing rather than standard residential rentals. Leading with the real use case filters out landlords who would never agree, and it gives you leverage to ask for the permitted-use clause to explicitly name short-term or minpaku use in writing, rather than relying on a verbal “that should be fine.”

Reikin and the agent fee are the most negotiable line items, particularly on longer lease terms (3+ years) or in buildings that have sat vacant for a while — landlords facing carrying costs on an empty unit will often waive key money to close faster. The guarantor company fee is generally fixed, since it’s set by the guarantor company’s own risk pricing, not the landlord. Deposit terms are harder to move, but you can sometimes negotiate faster return timelines or a lower deduction ceiling for wear and tear.

What Happens If You Don’t Get Explicit Permission?

Operating without explicit written permission puts your lease at risk of termination regardless of your minpaku notification status, and you carry that risk for the entire operating period, not just at move-in. Landlords can and do walk buildings, notice guest luggage or turnover cleaning patterns, and move to terminate leases for unauthorized subletting — sometimes years into a tenancy that looked stable. A verbal “the landlord knows” from a previous tenant or agent is not the same as a clause in your contract, and it won’t hold up if the landlord’s position changes, or the building changes management, or the landlord simply forgets the conversation happened.

Before you file a minpaku notification or apply for a hotel business (ryokan) license on a leased property, get the lease itself reviewed for permitted use, and get any consent to sublet or operate short-term rental in writing as an addendum if it isn’t already in the base contract. It’s a slower first step, but it’s much faster than untangling a licensing process built on a lease that never actually permitted the business.

FAQ

Q: Is key money (reikin) always required in Japan?

No — reikin is customary but not universal, and it’s increasingly waived or reduced in areas with more rental supply, on longer lease terms, or through negotiation, particularly for commercial-use leases where the landlord values a stable, professional tenant.

Q: Can a landlord terminate a lease after allowing short-term rental use for years?

A landlord can generally only seek to terminate a lease for breach of the actual lease terms, and even then only where the lease and the facts support it — so if subletting/STR use was explicitly written into the contract, informal past tolerance doesn’t create new legal risk the way undocumented consent does. This is exactly why getting it in writing at signing matters, and why case-specific legal advice is worth getting if a dispute does arise.

Q: Does a minpaku notification replace the need for landlord permission?

No — the minpaku notification and the landlord’s permitted-use consent are two entirely separate requirements, and filing one does not substitute for the other; you need both to operate without risk of eviction or having your notification challenged.

This post is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified professional for your specific situation.