You inherited a rental property that is under a sublease (master lease) — how the contract and the rent carry over

In short: inheriting a rental property that is still placed under a sublease (an ikkatsu kariage, a master lease) means the owner's position as lessor passes to the heirs by universal succession (Civil Code Article 896). You cannot terminate the master lease simply because an inheritance has occurred — a termination or refusal to renew by the owner's side requires just cause (借地借家法, Act on Land and Building Leases, Article 28). And even where a "rent guarantee" is written in, a rent-reduction demand from the sublease operator is legally possible (Act on Land and Building Leases, Article 32, paragraph 1).

Inheriting a parent's apartment building or condominium that had been entrusted to a sublease operator under a "master lease" is a pattern we increasingly see in inheritance consultations. Unlike an ordinary tenancy, a business sits in the middle, which makes the contract you are inheriting harder to read. This article is for anyone who has inherited a rental property under a sublease: how the contract and the rent carry over, and what to check. The wider picture of inherited property is set out at inherited property.

What happens to the "lessor's position" under the sublease when you inherit?

It passes straight to the heirs.

A sublease (ikkatsu kariage) is built from two layers of lease. There is the master lease between the owner and the sublease operator (owner = lessor, operator = lessee), and the sub-tenancy by which that operator lets the units to occupants (operator = sublessor, occupant = subtenant). What you inherit is the owner's position as lessor in the master lease.

Article 896 of the 民法 (Civil Code, Act No. 89 of 1896) provides that "an heir succeeds, from the time of commencement of inheritance, to all rights and obligations attached to the property of the decedent." Both the ownership of the property and the lessor's position under the master lease are among those rights. Inheritance is not a transfer by the parties' intention but universal succession by operation of law, so the sublease operator's consent is not required for the inheritance itself.

Party	Position in the contract	What inheritance does
Deceased parent (owner)	Lessor under the master lease	The lessor's position passes to the heirs (Civil Code Art. 896)
Sublease operator	Lessee / sublessor under the master lease	Only the counterparty changes to the heirs
Occupant	Subtenant under the sub-tenancy	No change to the relationship

What you do is complete the inheritance registration and then give the sublease operator written notice that the lessor has changed. The account for the rent and the point of contact now move to the heirs. The registration application itself is the work of a judicial scrivener; the interaction of the registration duty with a sale is covered in Can the family home be sold before the inheritance is registered?.

Can you terminate the master lease because of the inheritance?

You cannot terminate it immediately just because an inheritance has occurred.

The sublease operator is the lessee under the master lease. Even a business, once it is renting a building, enjoys the protection of the Act on Land and Building Leases. Article 28 of the 借地借家法 (Act No. 90 of 1991) provides that, for a building lease, a refusal to renew or a notice of termination given by the lessor requires "just cause." The mere fact that an inheritance has occurred does not amount to just cause.

In other words, the owner's own convenience — wanting to run the property directly, or to sell it — is not, in principle, enough to cut the contract off mid-term. A contract may contain a "termination by the owner" clause, but how far such a clause is valid in light of Article 28 is a matter of contractual interpretation and dispute that turns on the wording and the circumstances. We (the real estate side) do not judge that. Where a termination or refusal to renew looks likely to become a dispute, the matter goes to an attorney, engaged by you directly.

Note that termination from the operator's side is often done under the contract's notice clause. The risk of "being cancelled on despite the guaranteed lease" sits with the lessee side — that asymmetry is the thing to watch when reading a sublease contract.

How should you deal with a rent-reduction demand from the sublease operator?

Approach it on the footing that a reduction can be demanded even where there is a "rent guarantee."

Article 32, paragraph 1 of the 借地借家法 provides that where the rent for a building has become unreasonable owing to changes in economic circumstances and the like, either party may, regardless of the terms of the contract, demand an increase or decrease of the rent going forward. The parties here include the sublease operator, who is the lessee.

The Supreme Court, in a judgment of 21 October 2003, held that Article 32, paragraph 1 applies even to a so-called sublease contract, and that the paragraph is a mandatory provision whose application cannot be excluded by a clause providing for automatic rent increases. Even where the contract says "the rent is guaranteed for X years" or "the rent rises every X years," that alone does not shut out a reduction demand.

Common misunderstanding	The reality	Basis
A "rent guarantee" means no reduction	A reduction can be demanded	Land and Building Leases Act Art. 32 (1) (mandatory)
An automatic-increase clause guarantees increases	The clause alone cannot exclude Art. 32	Supreme Court judgment of 21 Oct 2003
The operator sets the reduction unilaterally	Whether it is warranted, and the fair amount, are judged on all the circumstances	Same judgment

Whether a reduction demand is warranted, and what the fair rent is, are matters judged on the surrounding market, economic circumstances and how the contract came to be concluded, taken as a whole. We judge neither the merits nor the figure. Where the rent becomes a dispute, the matter is for an attorney; where the rent level itself needs to be valued, for a real estate appraiser — each engaged by you directly.

What documents does the sublease law (the Rental Housing Management Business Act) require you to check?

Alongside the inherited contract, re-read the important-matters explanation document and the document delivered at conclusion.

The 賃貸住宅の管理業務等の適正化に関する法律 (Act on Optimisation of Rental Housing Management Business, Act No. 60 of 2020), commonly the Rental Housing Management Business Act, introduced controls on sublease operators (in law, "specified sublessors") and on master leases (the "specified master lease contract") in response to sublease troubles. The sublease-control provisions have been in force since 15 December 2020.

Article	Heading	Content
Art. 28	Prohibition of exaggerated advertising	Prohibits representations markedly at odds with the facts as to rent, contract term, etc.
Art. 29	Prohibition of improper solicitation	Prohibits solicitation that intentionally fails to state disadvantageous facts such as the risk of reduction
Art. 30	Pre-conclusion explanation and document	Explains, in writing before the contract, the conditions for rent revision, termination, etc.
Art. 31	Document at conclusion	Delivers, at conclusion, a document setting out the contents of the contract

For inheritance, this Article 30 important-matters explanation document records the conditions for revising the rent, whether the owner may terminate, who bears maintenance and repair costs, and so on. What the parent was told before signing is recorded here. Look for it together with the contract.

You can also check whether the sublease operator is a registered business. Among those carrying on a rental housing management business, one managing 200 or more units must be registered with the Minister of Land, Infrastructure, Transport and Tourism (in force 15 June 2021), and registered businesses appear on the Ministry's register. Whether a business is registered is most reliably checked through the Ministry's Rental Housing Management Business Act portal or the corporate information search system for construction and real estate businesses (etsuran2.mlit.go.jp).

For inheritance-tax valuation and a sale, who should you ask for what?

Who you ask splits by role.

First, the inheritance-tax valuation. A building let to others is valued as a "leased house" (kashiya), and its site as "land with a leased house" (kashiya-tatetsuke-chi), which are treated at a lower value than if used by the owner. But the actual figure, and whether the land qualifies for that treatment, are case-by-case judgments — the province of a licensed tax accountant. We do not calculate the value.

Next, registration. The transfer of ownership by inheritance (inheritance registration) is the work of a judicial scrivener. If you later sell a sublease property, you also need to grasp how the lessor's position moves. Civil Code Article 605-2 (newly established by Act No. 44 of 2017, in force 1 April 2020) provides that where a property that satisfies the requirements for perfecting a lease is transferred, the lessor's position passes to the buyer. Under paragraph 3, for the buyer to assert that position against the lessee (the sublease operator), registration of the transfer of ownership is required. You can sell while the property is under sublease, but you arrange it on the footing that the lessor changes.

What to do	Who to ask (entity)
Property investigation, valuation, brokerage, sale contract	Yotsuba Real Estate Co., Ltd. (licensed real estate agent)
Notice of the change of lessor, estate division agreement and similar documents	Yotsuba Administrative Scrivener Office
Inheritance and ownership-transfer registration	Judicial scrivener
Inheritance-tax valuation and filing for the leased house and its site	Licensed tax accountant
Disputes over mid-term termination or rent reduction	Attorney

On whether to sell or hold, see Should the inherited family home be sold or kept?; on carrying over a rented apartment building generally, When you inherit a rental apartment building; and on comparing net proceeds, How much do net proceeds differ between an outright purchase and brokerage?.

Property investigation, how to think about price, structuring terms with a buyer, brokerage and the sale contract are handled by Yotsuba Real Estate Co., Ltd. (licensed real estate agent, Tokyo Governor (1) No. 113304). Notice of the change of lessor, and the preparation of documents concerning rights and obligations and documents for submission to public authorities such as an estate division agreement, are handled by Yotsuba Administrative Scrivener Office. These are two independent business entities, engaged separately and directly by you. We neither pay nor accept referral fees or introduction commissions. Consultation is free of charge.

Frequently asked questions

Q. If I tell the sublease operator "I have inherited, so I want to terminate," can I terminate straight away?
A. As a rule, the owner's side cannot terminate immediately just because of the inheritance. The sublease operator is the lessee under the master lease, and Article 28 of the 借地借家法 requires just cause for a termination or refusal to renew by the lessor. Even a mid-term termination clause in the contract has an effect that turns on the wording and the circumstances — a matter of contractual interpretation. Take the question to an attorney.

Q. The contract says "rent guaranteed for X years." Does that mean it can never be reduced?
A. It can be reduced. Article 32, paragraph 1 of the 借地借家法 is a mandatory provision, and the Supreme Court recognised its application to sublease contracts in its judgment of 21 October 2003. A rent guarantee or an automatic-increase clause does not, by itself, shut out a reduction demand. Whether a reduction is warranted, and the fair amount, are judged on all the circumstances — we do not judge them.

Q. When I inherit, do I have to conclude a fresh sublease contract?
A. No. The lessor's position passes to the heirs automatically under Civil Code Article 896, so neither the operator's consent nor a new contract is required. But give the sublease operator written notice that the lessor has changed, and update the account for the rent. You can confirm the contents in the inherited contract and the important-matters explanation document.

Q. How do I find out whether the sublease operator is a registered business?
A. A sublease operator managing 200 or more units must be registered with the Minister of Land, Infrastructure, Transport and Tourism, and registered businesses appear on the Ministry's register. You can check through the Ministry's Rental Housing Management Business Act portal or the corporate information search system for construction and real estate businesses. Check not only whether it is registered but also the contents of the important-matters explanation document delivered at conclusion (Article 30).

Sources (primary)

• e-Gov "民法" (Civil Code) — Act No. 89 of 1896. Art. 605 (perfection of a real property lease); Art. 605-2 (transfer of the lessor's position); Art. 605-3 (transfer by agreement); Art. 896 (general effect of inheritance). Arts. 605-2 and 605-3 were newly established by Act No. 44 of 2017 and came into force on 1 April 2020. Current text as amended by Act No. 45 of 2026, in force 24 June 2026. Accessed 7 September 2026.
• e-Gov "借地借家法" (Act on Land and Building Leases) — Act No. 90 of 1991. Art. 28 (just cause for refusal to renew, etc.); Art. 32 (1) (right to demand increase or decrease of rent). Current text as amended by Act No. 48 of 2022, in force 21 May 2026. Accessed 7 September 2026.
• e-Gov "賃貸住宅の管理業務等の適正化に関する法律" (Act on Optimisation of Rental Housing Management Business) — Act No. 60 of 2020. Art. 2 (4) (specified master lease contract); Art. 2 (5) (specified sublessor); Art. 28 (prohibition of exaggerated advertising); Art. 29 (prohibition of improper solicitation); Art. 30 (pre-conclusion document); Art. 31 (document at conclusion). Promulgated 19 June 2020. Sublease controls in force 15 December 2020; the registration system for rental housing management business in force 15 June 2021. Accessed 7 September 2026.
• Supreme Court of Japan, judgment of 21 October 2003 (holding that Article 32, paragraph 1 of the Act on Land and Building Leases applies to a sublease contract, and that the paragraph is a mandatory provision whose application cannot be excluded by an automatic rent-increase clause). Accessed 7 September 2026.
• Ministry of Land, Infrastructure, Transport and Tourism, "Rental Housing Management Business Act portal (system commentary)" — definitions of the specified master lease contract and the specified sublessor; the 200-unit threshold for the registration requirement. Accessed 7 September 2026.

There is no uniform, primary-source figure for the level of a rent guarantee, the commission rate paid to a sublease operator, or the penalty on termination, so no amounts are given here; check the individual master lease contract and the important-matters explanation document. The validity of a mid-term termination clause, and whether a rent-reduction demand is warranted and the fair rent, are matters that turn on the wording and the individual circumstances, and this article makes no assessment of any individual case.

This article is general information and does not offer a legal determination. Inheritance and ownership-transfer registration are carried out by a judicial scrivener, inheritance-tax valuation and filing for the leased house and its site by a licensed tax accountant, and disputes over mid-term termination or rent reduction by an attorney. Property investigation, brokerage and sale contracts are undertaken by Yotsuba Real Estate Co., Ltd. (licensed real estate agent); notice of the change of lessor and the preparation of estate division agreements and similar documents by Yotsuba Administrative Scrivener Office — two independent business entities, engaged separately and directly. We neither pay nor accept referral fees.

About the author

Joji Uramatsu — licensed real estate transaction specialist (Tokyo Governor registration No. 293544) and administrative scrivener (registration No. 25087022). Representative Director, Yotsuba Real Estate Co., Ltd. (licensed real estate agent, Tokyo Governor (1) No. 113304); principal, Yotsuba Administrative Scrivener Office. Kohinata, Bunkyo, Tokyo, about five minutes' walk from Myogadani station. In an inheritance under a sublease, the contract, the important-matters explanation and the registration go on the same table. Full profile: author page.