Apartment Shakedown... Pay Up or Get Out!
When making preparations to publish the Guide to Jobs in Japan two years ago, over 150 real estate agents serving the foreign community were surveyed. Just after the surveys went out I received a telephone call from Marius Serrao, the General Manager at Fontana Co., Ltd., who spent about 15 minutes on the telephone very positively describing all of the nice services that his company provided to foreigners. It all sounded very "progressive," and I was impressed. Fontana, which bills itself as "Tokyo's International Real Estate People," subsequently received a very nice write up in Guide to Jobs in Japan.
During the next two years, however, I was on more than one occasion quite disturbed to hear some rather serious complaints about Fontana from foreigners who had rented apartments there. Complainants were saying that the apartments were not very clean, prices not so low and that Fontana was engaging in heavy-handed and illegal tactics in enforcing draconian policies that violated Japanese law on several different points.
Fontana, which is Japanese-owned but entirely staffed by foreigners including management, appears to be more of a real estate agent as opposed to an operator of guest house/apartment facilities as the company takes a realtor commission for placing people in apartments. This makes the move-in fee three times the first month's rent (realtor fee, deposit, first month's rent) as opposed to rent and deposit only, which is what most true guest house/apartment operators charge.
Upon looking at a Fontana real estate contract, a few things quickly stand out. First it is very brief and does not say much. But it does say that the renter will pay a ´5,000 per day additional fee for every day that the rent is late. So, if a renter left for holiday and forgot to pay the rent. One month later, that person would come back to a ´150,000 yen late fee demanded by Fontana in addition to a ´75,000 yen monthly rent payment. That amounts to a 200 percent interest rate per month or 2,400 percent rate on an annual basis which is higher than just about the worst yakuza loan shark anywhere in Japan. This is a very clear violation of usury laws in Japan.
Another questionable clause in the contract says that Fontana will make the tenant move out with seven days notice if he or she violates the contract, i.e., does not pay the rent on time, makes too much noise, etc. Such a seven-day notice eviction is also very clearly illegal in Japan. At the very least 30 days notice would be required after nonpayment of rent, and there would be other procedural matters that would have be done first. Evictions have generally taken up to six months or longer in Japan, although new laws recently passed may have sped that period up a little. In any case, it is illegal to evict a renter on only seven days notice, and this is nothing more than a Fontana scare tactic. Moreover, it is illegal for Fontana to evict a renter by means of its own force. This must be done through a court procedure.
In October of 1999 United Front Japan (http://www.ufj.gol.com) reported that an unsuspecting renter of Fontana experienced threats in regard to this usurious late fee charge. The person had inadvertently forgotten to pay the rent on time after three years of on-time payments and found himself slapped with a hefty late fee at the rate of ´5,000 a day. When the renter refused to pay the late fee, Fontana sent people over to the door and threatened to put a metal collar lock on his door if the late fee was not paid by 8:00 p.m. that same day. After telling Fontana that he had consulted with the Shinagawa Tenants League (Tel. 03-3786-6047 Mon.-Fri. 10am-5pm) on the matter, Fontana backed down on the demand for the late fee.
More recently in a different case, Fontana threatened another renter that they would put a collar lock on his door. This time it was not for a late fee but rather for nonpayment of a "renewal fee," which no real estate agent or landlord can force a tenant to pay. This was particularly insidious because there was no mention of a renewal fee in the rental contract, and Fontana was demanding the renewal fee after one year rather than the standard two years that most Japanese realtors include in most rental contracts. Fontana has been just springing this hidden fee on renters after the completion of their one-year contracts and forcing out renters who do not cough up the extra money.
According to the renter, who was well into his fourth year at the apartment, Fontana had demanded and received two previous one-month rent renewal fees, but the company had forgotten to ask for the renewal fee at the end of the third year, which was in January. Then in March Fontana suddenly began to badger him for payment of the "contract renewal fee" in the amount of ´75,000. When he refused a foreign representative of Fontana named Collin came to his door and said that the fee had to be paid that day. The renter asked what would happen if he did not pay the fee, and Collin said, "We are going to put a lock on your door." The man, who had already paid the March rent, said that he would leave but that Fontana would have to refund the rest of his March rent to which Collin said, "There is no reason for us to do that. You will just have to leave." The renter became tired of dealing with Fontana and soon moved out.
Shortly after this, his neighbor received the same demands as his one-year contract came to an end. Fontana was demanding that he pay a one-month renewal fee (´75,000 yen in this case) in addition to the rent in order to continue to stay in the apartment. The neighbor also learned that another renter in the same building had received the renewal fee demand. But this person worked as an English teacher for the very large English school Nova, which supplies many teachers only a monthly basis to Fontana apartments. She called and complained to Nova about the unexpected demand for extra money. Fortunately for her that was the end of the matter as Fontana did not contact her anymore about it.
Her friend, however, received a barrage of harassment from Fontana, which forced him out of the apartment at the end of May when the one-year contract expired. The harassment consisted of two visits to his door, several phone calls and ultimately. Fontana refusing to accept his rent payment for June.
After the tenant's first refusal to pay the ´75,000 renewal fee, Fontana said it would raise the rent to ´85,000 which would amount to ´120,000 yen in extra payments rather than the ´75,000 fee being demanded. The tenant said this was not fair and Marius Serrao, the general manager at Fontana, responded that it was fair because he had people paying ´75,000, ´85,000 and even ´95,000 yen for the same room depending on differing circumstances.
The tenant asked why Nova teachers could get out of paying the renewal fee and others had to pay it, and Serano replied that Nova was a good customer and its teachers "get a break." Actually a more factual description here would be Nova teachers who complain to Nova get a break. Fontana did in fact attempt to extract the renewal fee from Nova teachers as well and only gave up after a complaint was made to Nova.
Serrao was not as loose with his language as his lieutenants had been, one of whom told the renter several times, "If you don't renew your contract, you will have to get out." Serrao cleverly crafted his words, saying things like "We cannot continue the contract as it stands," "The contract is finished," "Your contract is over and expired," "If you wish to pay the rent you must pay the renewal fee and renew," "Our position is that we want the renewal fee."
Fontana then refused to accept the June rent payment, but fortunately for the renter he was able to find another place nearby quickly and moved out. Although he knew his rights in the matter and that he could continue to stay without paying the renewal fee (as explained to him by the legal consulting department of the Shinjuku ward office), the headache from the harassment was too much and he preferred moving.
The new apartment that he found near the Fontana place was nearly double the size for the same price and did not require any key money (reikin). It was a much better deal than what Fontana had been offering, and it was clean. The renter said that the Fontana place had not been very clean and required a day's work by him and two friends to scrub a grimy film off of the walls when he first moved in. He did have one positive thing to say on Fontana's behalf, mentioning that on two occasions when something needed repairs, Fontana sent someone to do the repairs very promptly and at its own expense. In this regard the renter said he was very pleased with Fontana's level of maintenance service.
For the record, tenants in Japan cannot be forced to pay renewal fees even if it is included in a rental contract. It is not illegal for real estate agents to "ask" for them but there is no enforceability at all on this matter. Moreover as long as the rent is paid tenants have the right to continue to live in an apartment, and there is absolutely nothing the landlord or real estate agent can do about this. The tenant's right to stay in an apartment as protected under Japanese law supercedes any "request" for renewal fee even if it was agreed to in a written contract.
In addition, it is not entirely clear whether a realtor must possess a realtor's license to issue real estate contracts and subsequently take realtor fees and commissions for issuing such contracts. After checking with the Tokyo Metropolitan Government offices, I could not find any record of Fontana Co., Ltd. in Nakano-ku being registered as having a realtor's license. In any case, if Fontana had taken the examination for such license it would have known the laws in Japan against extorting contract renewal fees out of tenants.
In the recent case, even the police officer at the local koban instructed the tenant to have any door locks cut off if Fontana were to put them on. The police officer, however, did not know anything about the procedure to counter Fontana's tactic of refusing to accept the rent. Here the tenant is clearly protected under Japanese law, and in fact it is the police who will open a bank account for the tenant. The tenant then makes the rental payments to the police who will hold it for the landlord until he or she decides to come and pick it up. It seems that you have to go to a larger police station and find the right section that handles these matters.
In its defense Serrao, told the tenant that the reason Fontana requires the renewal fee is to support the extra costs of renting to foreigners. But this explanation is weak on two points. First, rental rates at guest house/apartments marketed toward foreigners generally have rents ´10,000 to ´15,000 yen higher than general market rates as these extra costs (usually including furnishings) are built in to the rents.
Secondly and more importantly, there are at least 150 real estate agents and guest houses operators in Japan providing services to foreign people. Everyone has to abide by the law, and if Fontana or any other realtor is going to "ask" for renewal fees, this should be clearly stated up front at the time of signing the rental agreement. Springing unexpected charges on its renters after the fact gives Fontana an unfair market advantage where it can entice people with rental rates that appear lower than other competitors. Fontana is not the only company in Tokyo specializing in the valuable service of making apartments available to foreigners.
In the Japanese realty business, the renewal fee, generally after two years, has traditionally been split between the real estate agent and the landlord as a processing fee for issuing a new contract. So, if the tenant does not agree to sign a new contract there is no purpose for the fee. Some Japanese abide by such contract stipulations and others do not. In any case, renewal fees are strictly voluntary because tenants do not need a new contract to continue residing in their apartments. Tenant rights in this matter carry a great deal of weight in the Japanese legal system.
Foreign people experience a great deal of problems in trying to make a living in Japan and the first big problem is often just finding a real estate agent that will rent to them. On this point Fontana and agents offering housing to foreigners should be commended for providing an important service to the foreign community, but at the same time this should not serve as an excuse for illegal and unethical behavior.
Sadly some of the worst problems foreigners experience around the world upon entering a new country is at the hands of other foreigners. In other words, it is sometimes the foreigners who have established themselves in the host country who can be quickest to take advantage of the lack of information and knowledge by newcomers and exploit them for financial gain as Fontana has been doing.
I would like to think that Fontana's actions were only caused by difficult business conditions and not a systematic plan of exploitation. In any case this behavior must be corrected. Foreigners have a hard enough time with the housing situation in Japan, and the last thing they need is to be exploited by other foreigners.
by James C. Gibbs
(Office A is currently representing a group of victims who have had money unlawfully extorted from them by Fontana. If you have experienced in the past or are currently experiencing any problems with Fontana please contact Office A at Tel. 03-5766-7239, Fax. 03-5766-7229, e-mail: grail@gol.com for consultation.)
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