Getting Your Security Deposit Back in Japan: What Landlords Can and Cannot Deduct

A security deposit (shikikin) in Japan is money that comes back to the tenant after the lease ends and the property is handed back, minus unpaid rent and other amounts the tenant owes (Civil Code, Article 622-2(1)). The tenant's duty to restore the property covers only damage the tenant caused. It does not include wear and tear from normal use or deterioration over time (Civil Code, Article 621). Guidelines from the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) treat wallpaper as losing its value to JPY 1 over six years, so the tenant's share falls as the years pass. If you disagree with a charge, ask for an itemised statement and negotiate; for claims of JPY 600,000 or less, small claims proceedings are available.

• At the move-out inspection, the landlord charges for replacing all the wallpaper and for professional cleaning, and says almost none of the deposit will be returned.
• After more than ten years in a flat, the tenant is charged for sun-faded wallpaper and discoloured tatami.
• A foreign employee renting a flat in Japan disputes the move-out bill and asks the company for help.
• A company wants to review move-out costs for flats it rents as staff housing, or for office space it leases.

The Civil Code defines a deposit as money, "whatever it is called", that the tenant gives the landlord to secure the tenant's obligations under the lease, such as rent (Article 622-2(1)). Money given for this purpose under another name, such as a "guarantee deposit" (hoshokin), is treated as a deposit.

The landlord must return the deposit, less the amount of the tenant's obligations, in the following cases (Article 622-2(1)):

• when the lease has ended and the property has been returned (item (i))
• when the tenant has lawfully assigned the lease (item (ii))

So handing back the property comes first. Refusing to return the keys until the deposit is repaid reverses the order the law sets.

What may be deducted are the tenant's monetary obligations arising from the lease, such as unpaid rent and restoration costs the tenant must bear. Whatever remains must be returned.

The tenant cannot ask the landlord to "take the unpaid rent out of the deposit" (Article 622-2(2)). Whether to apply the deposit to a debt is the landlord's decision.

At the end of the lease, the tenant must restore damage that occurred after receiving the property (Article 621, main text). But "damage" here excludes:

• wear and tear from normal use of the property
• deterioration over time

The tenant also has no duty to restore damage caused by reasons for which the tenant is not responsible (Article 621, proviso).

Restoration therefore does not mean returning the property to the brand-new condition it was in when the tenant moved in. Ordinary marks from everyday living and deterioration that comes with time fall outside the tenant's restoration duty and are the landlord's cost.

MLIT's "Guidelines on Disputes over Restoration to Original Condition (second revised edition)" (August 2011) set out how costs should be divided between landlord and tenant, to prevent disputes when tenants leave private rental housing. They are not law; they set out general rules that landlords and tenants should understand in advance.

Examples the guidelines treat as normal wear, borne by the landlord, include:

• discoloured tatami and faded flooring (caused by sunlight, or by leaks due to structural defects)
• dark marks on the wall behind a TV or refrigerator (so-called electrical burn)
• marks left by posters or pictures on the wall
• pin and drawing-pin holes (where the plasterboard does not need replacing)
• wallpaper discoloured by sunlight or other natural causes

Examples more likely to be charged to the tenant include:

• tobacco stains and smells (often judged to go beyond normal use)
• mould and stains that spread because condensation was left alone (where the tenant neither told the landlord nor wiped it)
• kitchen grease (where poor cleaning left soot and oil)
• nail and screw holes for hanging heavy items, deep enough that the plasterboard must be replaced
• deliberate damage such as graffiti

The point is that the same "hole in the wall" or "stain" may be charged differently depending on its cause and extent. Check each item on the bill.

Even where the tenant caused damage, the tenant does not necessarily bear the full repair cost. The guidelines take account of the age of the fixtures, reducing the tenant's share as the years go by.

For wallpaper, the guidelines calculate the tenant's share on a straight line (or curve) that reaches a residual value of JPY 1 after six years. For example, if a tenant marks wallpaper that is more than six years old, the wallpaper itself has almost no value left.

Following the abolition of residual value for depreciable assets in the 2007 tax reform, the revised guidelines changed the residual value from 10% to JPY 1. Examples of useful lives listed include six years for air conditioners and other heating and cooling equipment and for refrigerators, five years for kitchen sinks, and fifteen years for toilets, washbasins and other plumbing fixtures.

However, the guidelines also say that a tenant must use even fixtures past their useful life with the care of a prudent manager, and may still have to bear repair costs. Age does not mean anything goes.

As to the area to be redone, the guidelines say wallpaper should preferably be charged by the square metre, while accepting that the tenant may bear the cost of re-papering the whole wall surface that includes the damaged spot. The landlord cannot automatically charge for re-papering an entire room.

Leases sometimes say that "the cost of cleaning on move-out is borne by the tenant". The Q&A in the guidelines says that whether a cleaning clause is valid is judged by:

• whether the content and scope of what the tenant must pay is shown
• whether the contract states, or the tenant was told orally, that the tenant will also pay for normal wear that would otherwise not be the tenant's cost, and what that covers specifically
• whether the amount is reasonable

Where an individual rents a home from a business (such as a property company), the Consumer Contract Act is also relevant (Article 2(3)). A clause that restricts a consumer's rights or increases a consumer's obligations compared with the default rules of law, and that unilaterally harms the consumer's interests contrary to good faith, is void (Consumer Contract Act, Article 10).

But when a company leases an office or shop, it is not a "consumer", so the Consumer Contract Act does not apply (Article 2(1) and (2)). The MLIT guidelines also assume private rental housing. For business premises, the wording of the restoration clause in the lease matters even more.

First, ask for an itemised statement. The Q&A in the guidelines says the landlord has a duty to explain the restoration costs deducted from the deposit, and the tenant can request a breakdown and an explanation.

When you receive it, check each item: is it normal wear or ageing, has the age of the fixture been taken into account, and is the area to be redone too large? Dated photographs from move-in and move-out, and any record of damage noted at move-in, can be used as evidence.

If talks fail and the amount you are claiming is JPY 600,000 or less, you can use small claims proceedings at the summary court (Code of Civil Procedure, Article 368(1)). It is a procedure for resolving small money disputes quickly and at low cost. There is a cap on how many times it can be used at the same summary court in the same year (proviso to Article 368(1)).

The right to claim the deposit back expires five years after you become aware that you can exercise it, or ten years after you could exercise it (Civil Code, Article 166(1)). Do not let the matter drift after moving out.

• Open your lease and the explanation of important matters, and check what they say about restoration, deposit deductions (shikibiki) and cleaning.
• Record the condition of the property at move-in with dated photographs (if you are already living there, record its current condition).
• At the move-out inspection, do not sign anything agreeing to costs on the spot; get an itemised statement first.
• Review each item on the statement against the guidelines' cost division and depreciation approach.
• If your company rents staff housing or offices, keep a list of each property's restoration clause and deposit or guarantee amount.

• Most or all of the deposit has been deducted, and the landlord gives no explanation when asked for a breakdown.
• You have been billed restoration costs exceeding the deposit.
• On leaving an office or shop, you disagree with the landlord over the scope of restoration work or the contractor the landlord designates.
• Your company wants to decide how to handle a move-out dispute involving a foreign employee.

Q. When will I get my deposit back? The landlord's duty to return it arises when the lease has ended and you have handed back the property (Civil Code, Article 622-2(1)(i)). Handover comes first; repayment follows. If the lease sets a time for repayment, check that too.

Q. I have lived here for eight years. Must I pay the full cost of new wallpaper? Under the guidelines' approach, wallpaper is treated as reaching a value of JPY 1 after six years, so the wallpaper itself has almost no value left. However, the guidelines say that even for fixtures past their useful life, if the tenant damaged them deliberately or negligently (for example, deliberate graffiti), the tenant may have to bear costs such as labour needed to restore their function.

Q. Do I have to pay for professional cleaning? If you cleaned normally before leaving, cleaning is generally considered the landlord's cost. If the lease has a cleaning clause, its validity depends on whether the scope of the charge was shown, whether it was stated in writing or explained orally that you would also pay for normal wear and what that covers, and whether the amount is reasonable.

Q. Do the same deposit rules apply to foreign tenants? If you rent a property in Japan under a Japanese lease, your nationality does not change the deposit and restoration rules; the Civil Code and the guideline approach described in this article will normally apply. Do not sign a contract you do not understand. Our firm can advise in English.