日本語 · English · 简体中文 · 繁體中文 · Português · Tiếng Việt
2026-09-08
Leasehold basics ― ground rent, renewal and the landlord's reversion: what differs between the side that lends the land and the side that borrows it
"Leased land" (借地) is where your own house stands on someone else's land. The difference between ordinary and fixed-term leasehold rights under the Act on Land and Building Leases (借地借家法), a guide to ground rent, renewal fees and consent fees, the leasehold ratio in inheritance tax valuation, and why the landlord's reversion (底地, the lender's land) is worth so little. This article sets out the premises for deciding whether to keep leasing land or sell it.
About this translation ― This page is an English translation of an article originally written in Japanese by KuraLab's operator, a licensed real-estate transaction specialist (宅地建物取引士) and administrative scrivener (行政書士) in Japan. The Japanese original is the authoritative text; where the two differ, the Japanese version prevails. The article explains Japanese law and procedure in general terms as of the date shown. It is not legal, tax or immigration advice for your situation ― please confirm with a licensed professional in Japan. Japanese terms are kept in parentheses so you can search for them. Read the Japanese original
The land the father left was a reversion (底地) with three houses standing on it. All three belonged to leaseholders, and the ground rent came to 42,000 yen a month in total. The son who inherited it said, "The roadside land value shows it is worth 60,000,000 yen as vacant land. If I get the three households to leave, I can sell it, can't I?" He cannot get them to leave. All three are contracts under the old Land Lease Act, and as long as they keep paying the rent, they can in effect live there for ever. "Then what is this land to me?" This article is the answer to that question.
"The land belongs to the landlord, the house belongs to me." That state is leased land (借地). The right to lease land and build on it is called a leasehold right (借地権), and the land seen from the lender's side is called the reversion (底地, sokochi). In inheritance consultations, both borrowers and lenders come, and although they are looking at the same land, their sense of its value is completely different. Here I set out the mechanism.
The rules of leased land are set by the Act on Land and Building Leases (借地借家法). It came into force on 1 August 1992, and contracts concluded before that remain governed by the old Land Lease Act. Most leaseholds still in existence are contracts under the old Act; for the landlord to end the contract, "just cause" (正当事由) is required (needing the land for their own use, paying relocation money and so on), and in practice it is almost never found. The borrowing side can in effect use the land for ever as long as it keeps paying the rent.
There are two kinds of leasehold right under the Act on Land and Building Leases. An "ordinary leasehold right" (普通借地権) has an initial period of 30 years or more, 20 years after the first renewal and 10 years or more thereafter, and refusing renewal requires just cause. A "fixed-term leasehold right" (定期借地権) has no renewal, and comes in three types: general fixed-term (50 years or more), business fixed-term (10 years or more and less than 50), and leasehold with a building transfer clause (30 years or more). When the period ends, the land is returned as vacant land or the building is sold to the landlord and the lease ends. A house advertised as "with fixed-term leasehold" is cheaper because of the land, but on the premise that it is returned after 50 years.
In summary, the kinds of leasehold (as of September 2026): old-Act leasehold (contracts up to July 1992), period as per contract, renewed unless there is just cause, in practice continuing indefinitely. Ordinary leasehold, initially 30 years or more, then 20, then 10, renewed unless there is just cause, renewal the rule at expiry. General fixed-term leasehold, 50 years or more, no renewal, returned as vacant land. Business fixed-term leasehold, 10 years or more and under 50, no renewal, returned as vacant land (business use only). Leasehold with building transfer clause, 30 years or more, no renewal, ending with the sale of the building to the landlord.
There is no legally fixed amount of ground rent; it is set by contract. As a guide, three to five times the total of the fixed asset tax and city planning tax on the land is often cited as the going rate for residential land, but it varies considerably by area and by when the contract was made. Either side can demand an increase or decrease if circumstances change (a rise in taxes, divergence from neighbouring rents), and if no agreement is reached it goes to mediation or court.
Renewal fees and consent fees are not required by law either. A renewal fee is a lump sum the leaseholder pays the landlord at renewal, arising where the contract provides for it or where there is a local custom. A consent fee is a lump sum paid to obtain the landlord's consent to sell the leasehold to a third party or to rebuild the house. Where consent cannot be obtained, there is a procedure called "leasehold non-contentious proceedings" (借地非訟) for asking the court for permission in place of the landlord's consent.
For inheritance tax, the leasehold and the reversion are valued separately. Using the leasehold ratio (A to G) mentioned in another article on this site about the roadside land value map, the vacant-land value multiplied by the leasehold ratio is the value of the leasehold, and the remainder is the value of the reversion. In an area with a 60 per cent leasehold ratio, for land worth 60,000,000 yen vacant, the leasehold is 36,000,000 yen and the reversion 24,000,000 yen.
But this valuation and the price it actually fetches differ greatly. A reversion yields rent but cannot be used by the owner, and the leaseholders are not expected to leave. A third-party buyer would judge it by the yield on the rent, so it often fetches only 10 to 20 per cent of the vacant-land price. A leasehold on its own also has limited buyers. The value of both is highest when landlord and leaseholder sell together, or when one buys out the other's right and restores the land to vacant possession. To someone who has inherited a reversion, I explain this structure first.
As a picture for land worth 60,000,000 yen vacant with a 60% leasehold ratio: in the inheritance tax valuation, leasehold 36,000,000 yen and reversion 24,000,000 yen. If the reversion is sold to a third party, as a guide, 6,000,000 to 12,000,000 yen. The market price of a reversion is set by the rental yield, so it normally falls far below the valuation; if landlord and leaseholder sell together, it approaches the vacant-land price.
The numbers on the ground. The inheritance tax valuation of the land as vacant was 60,000,000 yen by roadside value, with a leasehold ratio of 60%. For inheritance tax, the reversion is 60,000,000 yen × 40%, 24,000,000 yen. But that is a number for tax; if you try to sell the reversion to a third party, the price is set by the rental yield. Annual rent is 42,000 yen × 12, 504,000 yen; fixed asset tax and city planning tax are about 190,000 yen a year; what remains is about 310,000 yen a year. An investor buying at a 5% yield would pay about 6,200,000 yen; reversion-buying companies value at 10 to 15 per cent of the vacant-land price, 6,000,000 to 9,000,000 yen. Land valued at 24,000,000 yen for inheritance tax sells for 6,000,000 to 9,000,000 yen. One tenth of the "60,000,000 yen" the man first mentioned.
On the other hand, there are ways for the value to rise. That year, one of the three leaseholders said "I want to rebuild my house." The consent fee for rebuilding, by local custom, is 3 to 5% of the vacant-land price. This house's plot was about 80 square metres, about 14,500,000 yen by apportionment of the vacant-land price, so the consent fee was about 500,000 yen. Further, that leaseholder said "I would rather buy the land outright," and it became a matter of selling that part of the reversion to the leaseholder. The price when the leaseholder buys is completely different from a sale to a third party: 40 to 50% of the vacant-land price as a guide. 40% of about 14,500,000 yen is 5,800,000 yen. The reversion under one of the three houses alone fetched close to what all three would fetch from a third party.
Conversely, there is the route of the landlord buying the leasehold and restoring vacant possession. Of the remaining two houses, one leaseholder was elderly and the children had homes of their own. When that leaseholder dies, the children may want to sell the leasehold to the landlord. The price of a leasehold is about 60% of the vacant-land price, so 8,400,000 yen on a plot worth about 14,000,000 yen. Buy it, and those 80 square metres return to vacant land that sells for 14,000,000 yen. Buy for 8,400,000 and sell for 14,000,000, that is the calculation. A reversion is land whose price changes fourfold depending on "whom you sell to and whom you buy from."
The tool on this site called the Future of Ground Rent (地代の未来) takes the lender's standpoint and compares selling now with the family continuing to lease, by entering the monthly rent and the family composition and comparing cumulative amounts by generation. If the reason the market price of a reversion is low is as described here, it is meaningful to set the sale price beside the total of decades of rent.
To the man who asked "what is it to me?" I handed three numbers. Sold to a third party, 6,000,000 to 9,000,000 yen; sold to the leaseholders, 5,800,000 yen per house; buy the leasehold and restore vacant possession, 14,000,000 yen per house. He sold the first plot to its leaseholder for 5,800,000 yen and is watching the other two while continuing to receive rent. I wrote above that "the value of both is highest when one buys out the other's right." Inheriting a reversion is an inheritance of waiting.
Written by: 長澤 湊（licensed real-estate transaction specialist, administrative scrivener, assistant surveyor） Content checked on: 2026-10-14
This article is a general explanation of Japanese rules and procedures, not advice on an individual case. Figures and rules are as of the date shown. For your own situation, consult a lawyer, judicial scrivener, tax accountant or administrative scrivener in Japan.