Inherited a rental property in Japan? What to check first
When you inherit a rental property, the existing leases pass to you unchanged. Tenants do not have to move out. The right to receive rent, and the landlord's responsibilities, including returning deposits, move to the heir.
If there are several heirs, decide early who receives the rent and who is the contact for the manager and the tenants until the estate is divided. It is worth asking a professional how rent is treated before and after the division.
Take particular care if you are thinking of renouncing the inheritance. Renunciation is normally filed with the family court within three months of learning that the inheritance began. Spending the rent or disposing of the building before then can be treated as accepting the inheritance. Speak to a lawyer or judicial scrivener before you decide.
Since April 1, 2024, registering real estate acquired by inheritance has been required by law. You must apply within three years of learning that you acquired it, and failing to do so without good reason can lead to a non-criminal fine of up to 100,000 yen. Property inherited before April 2024 is covered too, with a deadline of March 31, 2027 as a rule (later, depending on when you learned of the acquisition). For the procedure, speak to a judicial scrivener (shiho shoshi).
Next, check that rent is not still being paid into the late owner's account. Once the bank learns of the death, the account is frozen and tenants may be unable to pay. If the account changes, tell tenants in writing and give the date from which rent goes to the new account. Check with the insurer too, because the building's fire insurance may need to be transferred to your name.
Tax filings have deadlines too. The heirs file a final return for the deceased's income for that year, including rent received up to the date of death, within four months of learning of the death. If inheritance tax is due, the return is due within ten months. After that, rent is the heir's real estate income and is declared as such. For the figures and filings, please speak to a tax accountant.
If a management company was looking after the building, decide whether to keep that contract. If it is a master lease (sublease), it is treated differently from a management contract and ending it can be restricted under the Act on Land and Building Leases. If it is a management contract, this is a good moment to check the fee, how often you get reports and who decides on repairs.
Even if you haven't decided whether to keep or sell, a record of the building in photos and floor plans helps either way. List the current leases, rent payments and past repairs too.
We keep a digital record of each building we manage, with 360° captures, floor plans, equipment, documents and repair history. If you live far away or outside Japan, you still receive the monthly statement and can approve repairs from wherever you are, in Japanese or English.