If I sell while the tenant is still living there, what happens to the security deposit? — What carries over in a sale with a tenant in place (オーナーチェンジ)

Even if you sell while the tenant is still living there, the obligation to return the security deposit (敷金) passes to the buyer automatically as a matter of law. However, you can only assert this against the tenant once the registration of transfer of ownership has been made, and how the money equivalent to the security deposit passes from the seller to the buyer is settled by contract, not by statute.

This article is for the side that is selling a property it has been renting out. If you intend to keep renting it out while you live overseas, see For overseas owners (renting out); if you are on the tenant's side, see Which parts of a residential lease to read. What follows separates what transfers automatically from what you have to settle by contract.

Can I sell while the tenant is still living there?

You can. There is no requirement to have the tenant move out first.

The Civil Code (民法), Article 605-2, paragraph 1 provides: "Where the requirements for perfection of a lease under the preceding Article, Article 10 or Article 31 of the Act on Land and Building Leases (借地借家法) (Act No. 90 of 1991), or other laws and regulations have been satisfied, and that real property is transferred, the position of lessor of that real property is transferred to the transferee." The standing of landlord itself moves to the buyer.

How the perfection requirement is satisfied differs according to the type of property.

Property	Perfection requirement	Basis
Building	When the building has been delivered (registration is not required)	Act on Land and Building Leases, Article 31
Real property generally	When the leasehold right has been registered	Civil Code, Article 605

What actually does the work in practice is Article 31 of the Act on Land and Building Leases. That article provides: "A lease of a building, even without registration, takes effect against a person who subsequently acquires a real right in that building, once the building has been delivered." If the tenant is actually living there, the buyer cannot say, "I have bought it, so please move out." A sale with a tenant in place (オーナーチェンジ) is a transaction built on top of this article.

Note also that the Civil Code, Article 605-2, paragraph 2 provides that the position of lessor is not transferred where the parties agree that it is retained by the transferor and that the transferee leases the property to the transferor. That arrangement keeps the seller as the lessor, however, which is the opposite of what an owner who wants to be out of the management of the property is trying to achieve.

Is the tenant's consent required?

It is not.

The Civil Code, Article 605-3 provides: "Where the transferor of real property is the lessor, the position of lessor may be transferred to the transferee by agreement between the transferor and the transferee, without requiring the consent of the tenant." The words "without requiring the consent" are in the statute itself.

So it does not happen that a deal comes together and is then thrown back to the start because the tenant objects. For anyone working to a departure deadline, that matters a great deal. That said, the lease may contain a special clause, and you cannot know what effect it has without reading the wording.

Who ends up returning the security deposit?

The buyer. That is the outcome even without any special clause.

The Civil Code, Article 605-2, paragraph 4 provides that when the position of lessor is transferred, "the obligation relating to the reimbursement of expenses under the provisions of Article 608" and "the obligation relating to the return of the security deposit prescribed in Article 622-2, paragraph 1 under the provisions of that paragraph" are "assumed by the transferee or the transferee's successor."

What passes to the buyer is the obligation relating to the return of the security deposit (the security deposit under the Civil Code, Article 622-2, paragraph 1) and the obligation relating to the reimbursement of expenses (Civil Code, Article 608).

Whether money is a "security deposit" is not decided by what it is called. The Civil Code, Article 622-2, paragraph 1 defines a security deposit as money that the tenant delivers to the lessor, by whatever name it is called, for the purpose of securing the tenant's obligations arising under the lease. Even if the lease calls it "guarantee money" (保証金), money with that character is treated as a security deposit.

The second sentence of the Civil Code, Article 605-3 also applies the Civil Code, Article 605-2, paragraphs 3 and 4 mutatis mutandis. Where the position is transferred without consent, the treatment of the security deposit is the same.

How is the deposit money itself handed over?

This is where the practical work of the transaction sits.

There is no provision in the Civil Code governing how the transferor and the transferee are to settle the amount equivalent to the security deposit between themselves. That the buyer owes the return obligation to the tenant is fixed by statute; how the seller passes the funds for it to the buyer is settled by contract between the parties.

Method	What it means	What to watch
Deduct it from the purchase price	Settle by subtracting the amount equivalent to the security deposit from the price	No cash moves at completion. Write the breakdown into the settlement statement
Hand it over by remittance or in cash	Receive the price in full and hand the amount equivalent to the security deposit to the buyer separately	Receipt has to be confirmed. An overseas remittance takes days and costs fees

Either way, the conclusion that the return obligation sits with the buyer does not change. What changes is only the way money moves between seller and buyer. Arrive at completion day without having settled this, and everything stops there and then.

The amount itself may also have moved over the years. Before the sale, cross-check the lease (the amount of the security deposit or guarantee money, and any amortization or "shikibiki" non-refundable deduction clause), the renewal agreements and memoranda (changes in the amount), and the records of money received and how it was applied (application to unpaid rent).

From when does the buyer become "the landlord"?

From when the registration of transfer of ownership is made.

The Civil Code, Article 605-2, paragraph 3 provides that the transfer of the position of lessor "may not be asserted against the tenant unless the registration of transfer of ownership of the real property that is the leased object has been made." Even where seller and buyer have agreed, without that registration it cannot be asserted against the tenant.

Situation	When
The position moves as between seller and buyer	As provided in the sale contract
It can be asserted against the tenant	When the registration of transfer of ownership is made (Civil Code, Article 605-2, paragraph 3)

Applying for registration is the work of a judicial scrivener (司法書士). We will introduce you to a judicial scrivener, but you contract with that professional directly. We do not receive any referral fee.

Does the tenant have to be notified?

Notice is not a legal requirement.

Neither the Civil Code, Article 605-2 nor the Civil Code, Article 605-3 contains any wording that makes "notice to the tenant" a requirement. What the statute sets as the perfection requirement is the registration of transfer of ownership, and nothing else (Civil Code, Article 605-2, paragraph 3).

Even so, in practice a written notice is sent telling the tenant that the lessor has changed. The reason is not a legal one: it is that the tenant needs to change the account the rent is paid into.

What the notice covers	Why
That the lessor has changed, and the date	Because the payee for rent changes
The new bank details for rent	To avoid payments into the old account
That the new lessor has taken over the security deposit	To show where a refund is to be claimed
Contact details for equipment faults and the like	So that the tenant is not left stranded

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We have not checked the case law on how it is treated if the tenant pays rent to the former lessor (unverified).

Whose is that month's rent?

Dividing it by a pro rata daily calculation is the approach the Civil Code takes. This point is often explained incorrectly, so here are the articles.

Issue	Article	Content
Is rent a legal fruit?	Civil Code, Article 88, paragraph 2	Money and other things to be received as consideration for the use of a thing are legal fruits (法定果実)
How it is divided	Civil Code, Article 89, paragraph 2	Legal fruits are acquired by pro rata daily calculation in proportion to the duration of the right to collect them
When it is payable	Civil Code, Article 614	For buildings and building lots, it is paid at the end of each month

In other words, the Civil Code does provide for the pro rata daily apportionment of rent. The explanation that "there is no rule in law, so it is decided by custom" does not hold for rent.

These are, however, provisions the parties can vary by agreement. In practice most leases are payable in advance, in which case the settlement takes the form of the seller handing the buyer the part of the already-received rent that corresponds to the period after delivery. Write into the sale contract and the settlement statement which day is the dividing line.

Who is responsible for restoration to original condition when the tenant moves out?

What the tenant bears is the part that remains after taking out the deterioration that comes from ordinary use.

The Civil Code, Article 621 excludes "wear and tear of the leased object arising from ordinary use and profit-taking, and changes in the leased object due to the passage of time" from the "damage" that the tenant is obliged to restore. Damage arising from grounds not attributable to the tenant is excluded as well.

Category	Included in the restoration obligation?
Wear and tear arising from ordinary use and profit-taking	Not included
Change due to the passage of time	Not included
Damage arising from grounds not attributable to the tenant	Not included
Damage other than the above	Included

The person who draws this line and decides whether to deduct from the security deposit is the lessor at that time — which is to say, the buyer. That is precisely why it is worth handing the buyer the records of the property's condition at move-in (checklists, photographs, the record of the joint walkthrough). Without them, the buyer cannot verify whether a mark was already there before the tenant moved in.

If my departure is already fixed, where do I start?

By gathering documents. Sending for Japanese paperwork after you have left the country takes time.

What to gather	What to look at
The original lease	Rent, common area charges, the amount of the security deposit, the term, special clauses
Renewal agreements and memoranda	Whether the terms have changed
Records of rent received	Whether there are arrears; the most recent payment date
Documents for the rent guarantee company and the joint guarantor	How they are handled after the sale
Records of the condition at move-in	Material for judging restoration to original condition
The property management agreement	The notice period for termination
The condominium rules and general meeting materials (for a unit)	Management fees and the repair reserve fund; planned repairs

On top of that, decide whether to sell with the lease in place or wait for the tenant to leave, the delivery date you want, whether the amount equivalent to the security deposit is handled as a deduction from the price or by remittance, and who will be authorized to handle the procedures after you leave.

Why the delivery date is the reference point is covered in Non-resident status is determined as of the delivery date; the sequence after departure is in Selling after you leave Japan: what to do now; and the whole flow is set out in A selling guide for overseas owners.

Calculating and filing tax is the work of a certified tax accountant (税理士). We will introduce you to a certified tax accountant, but you contract with that professional directly. We do not receive any referral fee.

This article is general information. The conclusion changes with the special clauses in your contract and the circumstances of the property. Individual judgments are made by a qualified professional after reviewing the documents.

Sources for this article

Law	Article / paragraph	Content	Effective date / last amendment
Civil Code (民法)	Article 88, paragraph 2	Definition of legal fruits	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Civil Code (民法)	Article 89, paragraph 2	Pro rata daily calculation of legal fruits	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Civil Code (民法)	Article 605	Perfection by registration of the leasehold right	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Civil Code (民法)	Article 605-2, paragraph 1	Transfer of the position of lessor	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Civil Code (民法)	Article 605-2, paragraph 2	Retention of the position by the transferor	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Civil Code (民法)	Article 605-2, paragraph 3	The perfection requirement is the registration of transfer of ownership	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Civil Code (民法)	Article 605-2, paragraph 4	Assumption of the deposit return and expense reimbursement obligations	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Civil Code (民法)	Article 605-3	Transfer of the position without consent	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Civil Code (民法)	Article 608	The tenant's claim for reimbursement of expenses	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Civil Code (民法)	Article 614	Time for payment of rent	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Civil Code (民法)	Article 621	Restoration obligation (ordinary wear and tear and the like excluded)	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Civil Code (民法)	Article 622-2, paragraph 1	Definition of the security deposit and the obligation to return it	In force 24 June 2026 (last amended by Act No. 45 of Reiwa 8)
Act on Land and Building Leases (借地借家法)	Article 31	Perfection of a building lease by delivery	In force 21 May 2026 (last amended by Act No. 48 of Reiwa 4)

The effective date and last amendment for each article will be confirmed and filled in before publication. We have not checked the case law on whether the rules on notice of assignment of claims reach the transfer of the position of lessor, or on how rent paid to the former lessor is treated.

Related links

Page	URL
Feature: selling property when you leave Japan	/leaving-japan
For overseas owners (renting out)	/kaigai-owner
A selling guide for overseas owners	/column/overseas-owners-guide-japan-real-estate-sale
A valuation and a bid are two different things	/column/satei-gaku-to-fuda-chigai
How to tell whether a company is licensed	/column/takken-menkyo-bangou-shoukai
Non-resident status is determined as of the delivery date	/column/hikyojusha-hantei-hikiwatashi-bi
Which parts of a residential lease to read	/column/chintaishaku-keiyakusho-doko-wo-yomu
Selling after you leave Japan: what to do now	/column/shukkoku-go-ni-uru-ima-yaru-koto

This article is written by Joji Uramatsu, President of Yotsuba Real Estate Co., Ltd., a licensed Real Estate Transaction Specialist and administrative scrivener (行政書士). He spent 34 years as a journalist at the Mainichi Shimbun and was posted to China, Taiwan and Thailand as its China Bureau Chief. Kohinata, Bunkyo-ku — five minutes' walk from Myogadani Station.