House Hunting Tips for Foreign Residents: All About Joint Guarantors
Housing in Japan
If you’ve gone house hunting in Japan before, you’ve most likely heard of the term “rentai hoshonin,” known in English as a joint guarantor or co-signer. In this article, we’d like to explain all about joint guarantors and how they are involved in property rentals.
In recent years, the use of guarantor companies for rental contracts has increased, so the need for joint guarantor individuals is becoming less common. However, there are still many properties that require a joint guarantor in order to enter a rental contract.
When Japanese people rent properties, they usually ask a family member or relative to be their joint guarantor. However, joint guarantors must fulfill certain conditions, so not just any family member can become one. And with Japan’s rapidly aging society, it is becoming increasingly difficult even for Japanese to find suitable joint guarantors.
So why do many landlords require a joint guarantor to rent their property? What is the role of joint guarantor in the first place? What happens if you cannot find a joint guarantor? These are some of the questions we will answer in this article.
What is a joint guarantor and why do you need one?
Rental contracts normally last for several years, and a property owner runs the risk of lost income if they lease to a tenant who fails to pay the rent on time. While quite rare, there are cases of tenants who fail to pay for several months on end, or even tenants who run away (or go back to their home countries) while leaving behind all their belongings. There are also cases of tenants becoming unable to pay rent after getting hospitalized due to an accident or disease.
In order to avoid the potential loss of income for property owners in such situations, the joint guarantor system is implemented. This requires tenants to assign an individual (the joint guarantor) who is legally responsible to pay the rent should the tenant fail to do so. In other words, it is a sort of insurance or risk mitigation system for property owners.
Requirements to become a joint guarantor
Not anyone can become a joint guarantor. While the specific requirements for joint guarantors vary depending on the property owner or real estate agency, the commonly applied guidelines are as follows:
・Must be a relative of the tenant up to the 3rd degree of relationship
・Must have a stable income (equal to or higher than that of the tenant)
・Must be 20 to 65 years old
Furthermore, if the tenant is a foreigner, in most cases, the joint guarantor must be a Japanese national or a permanent resident.
During the application process for a rental property, joint guarantors are screened for approval in the same degree as the tenant. Even if the tenant himself/herself passes the screening, if the joint guarantor does not meet the minimum requirements, then the application will likely be rejected.
If the application is accepted, the joint guarantor must sign and stamp the rental contract using their registered seal. In most cases, they must also submit a seal registration certificate and a proof of income.
What happens if you cannot find a joint guarantor?
Given the above explanation of the requirements and responsibilities of a joint guarantor, you can see why it is often difficult for tenants to find one. Japanese people sometimes find it hard to ask a relative to be their joint guarantor. So it’s that much more difficult for foreigners who are new to Japan.
This is why in recent years, the use of guarantor companies has been increasing significantly, especially for foreign residents looking to rent properties. Simply put, a guarantor company is a company that takes the place of a joint guarantor.
Of course, using a guarantor company has its costs, but since guarantor companies also conduct their own screening for solvency, once they agree to serve you, you will most likely also pass the tenant screening conducted by the property owner or real estate agency.
If you are lucky enough to be able to find a joint guarantor, then you will definitely have more choices for the properties you can rent. In recent years however, more and more properties are requiring tenants to contract with a guarantor company as a condition for the lease, so it has become easier to rent a property even if you do not have a joint guarantor.
To supplement the information above, the responsibility of a joint guarantor is not limited to paying the rent in case the tenant fails to do so. If, for example, the tenant causes damage to the property and is unable to pay for compensation, the joint guarantor is legally obliged to pay the cost. While damages can sometimes be covered by renter’s insurance, depending on the severity, reparation costs can become quite high.
Although the need for joint guarantors is on the decline and may very well disappear in the future, it can’t hurt to know about the system and how it works.