According to a front page story in today’s Asahi Shimbun, a group of 15 nationwide “yachin hosho kaisha” (rental guarantee companies) have gotten together and at the end of the month will start compiling a blacklist of rent scofflaws.
Rental guarantee companies are a relatively new phenomenon. Normally, when you rent a property in Japan you must have a guarantor to cosign your rental agreement. For residences, landlords have traditionally insisted on family members, invariably parents, regardless of the age of the parents or their incomes relative to the prospective tenants’. Of course, sometimes this is impossible owing to the fact that the parents are dead or the prospective tenant is no longer in a good relationship with the parents or, most significant to this particular blog, the tenant is a foreigner. (Most foreigners tend to have their sponsoring companies cosign the rental agreement, which is preferable to landlords, anyway.) But when none of these conditions apply, the prospective tenant will hire a guarantee company, which usually charges a nonrefundable fee equal to about one month’s rent when the tenant signs and when he or she renews the contract.
The main task of the guarantee company is to pay the rent if the tenant is delinquent and then get the money back from the tenant at a later date. In this way, the guarantee company also acts as the executor of the rental agreement. The company can effectively evict the tenant if he or she neglects to pay on a continuing basis. Needless to say, landlords prefer this system since they are guaranteed their money and the headache of kicking out a scofflaw tenant is borne by the guarantee company. It is difficult to evict in Japan and usually requires going to court, which costs money. On average, it takes about eight months to evict a delinquent tenant.
According to the land ministry there are about 70 rental guarantee companies in Japan right now, and the number is growing every year. More significant, about 40% of current rental agreements are cosigned by such companies, a result of Japan’s aging society and the deterioration of job security (employers no longer acting as cosigners). Even as more and more rental properties go vacant, these companies’ revenues are increasing, according to a research company interviewed by the Asahi. This company surveyed 29 rental guarantee companies and found their combined revenues for 2008 was ¥22 billion, or double was it was in 2006.
The group of 15 has said clearly that the purpose of the blacklist is to prevent people who have repeatedly been delinquent in their rent in the past from renting again in the future, a goal that various NGOs have told Asahi will effectively “create more homeless people.” Of course, the main purpose is to scare prospective tenants into always paying on time and in full, since the blacklist will be mentioned in rental agreements involving guarantee companies. These 15 companies say about 1.2 million new contracts are signed every year, and that about 10% of these will probably end up being delinquent and thus land on the database blacklist. Strangely enough, the land ministry does not keep statistics on delinquency rates, and experts interviewed by the Asahi say it could actually reach as much as 20%.