What is a “guarantee company," and why is it required for foreigners to rent an apartment in Japan?
Housing in Japan
In Japan, when we rent apartments and contract with an owner, sometimes a cosigner is required. Even now there are many properties that require a cosigner to the tenant. The cosigner has the responsibility of paying the rent when the tenant fails to pay rent or other fees.
But the real estate agents supporting foreigners who are recommending “no cosigner required” apartments have increased these days. Unfortunately, this doesn’t always necessarily mean that they believe foreigners don’t need a cosigner because they never fail to pay rent.
The number of real estate agencies that ask you to sign a contract with a guarantor company instead of a cosigner for long-term rental contracts is increasing, especially in Tokyo. You may have seen the indication “Guarantor company required” on the Internet property information several times.
What is a guarantee company?
Why have the number of guarantee companies increased?
We explain why you are required to sign a contract with a guarantor company along with why you don’t need a cosigner.
What is a guarantor company?
Simply put the guarantor company is the company that takes the place of a cosigner. Why have the number of guarantor companies increased?
The system of a cosigner has some inherent problems. For example, the cosigner’s age. The cosigner is usually a parent or a relative. If the cosigner passes away, the tenant loses their cosigner.
In the case of foreigners, it is difficult to find a cosigner in Japan. Not everyone can be a guarantor, and there are some conditions that must be met. Especially for newcomers to Japan, it is very difficult to find a guarantor who meets these conditions.
On the other hand, if there is no cosigner and the tenant fails to pay rent or leaves Japan without notification, the landlord suffers.
For solving such problems, guarantor companies are needed. The landlord is safe because they can recover the rent from the guarantor company when some problems occur with a tenant.
The “No Cosigner Required” system basically means “you may use a guarantor company instead of a cosigner.”
What is the merit of contracting with the guarantor company?
Now let’s see the merits for the tenant.
The cosigner must meet the following conditions:
・Under 65 years old
・Be a relative of the tenant
・Have a stable income
Moreover, the cosigner must sign and put their seal on the contract. Additional documentation may be required on top of the guarantee of money in case of emergency. It is not an exaggeration to say that it is almost impossible for a foreigner to find such a cosigner.
On the other hand, when you use the guarantor company, you only have to register an emergency contact number in case something urgent happens. Unlike the cosigner, there is no obligation of debt guarantee because the rent payment obligation does not occur.
*Depending on the property, a cosigner is also required with the guarantor company.
For the emergency contact, only the following information is required, however the cosigner is required to disclose their place of work, annual income, and so on.
・Date of Birth
・Relationship with the tenant
As you can see it’s not so hard to find somebody to be an emergency contact.
There are the guarantor companies that specialize in foreigners, or those that can correspond in multiple languages are gradually increasing in number.
Screening and Costs
Not everyone who can pay the fees can get a guarantee from a guarantor company, because the guarantor company also conducts a tenant screening.
There are many guarantor companies, but the examination standard varies. Some companies base their decision on credit history while other companies base it on the history of past rent arrears.
・Were there any problems with paying the rent for the property?
*Rent should be less than one-third of the estimated monthly income.
・Have you submitted the necessary documents such as a copy of your passport, type and expiration date of your status of residence, residence card, proof of enrollment at your place of work, and so on?
In most cases, the screening process is based on these two criteria.
The costs also vary, the most common costs are as follows:
Initial cost ⇒ 50% to 75% of the monthly gross rent (rent + management fees)
Renewal fee⇒10,000 yen/year
In addition to this, they usually require a monthly fee.
A guarantor company has the disadvantage of being costly, but you should still be able to sign a lease agreement more easily than in the case you have to find a cosigner.
There is no doubt that the guarantor company is a strong ally for foreign residents looking for an apartment, because the screening process is easier than finding a cosigner.