You see two condos in Minato (港区). Same size. Same year. One is priced ¥120M. The other is ¥78M. The cheaper one is leasehold (借地権). The other is freehold (所有権). Before you assume the discount is a bargain, you need to understand what you are actually buying — and what you are not.
This guide explains how land rights work in Japanese condominiums, why leasehold units trade at a discount, and what risks foreign buyers in Tokyo should weigh before signing.
What "freehold" and "leasehold" actually mean in Japan
In a Japanese condo (マンション), you buy two things bundled together:
- The exclusive area (専有部分) — your unit's interior.
- A share of the land rights (敷地権) — your fractional interest in the plot under the building.
The land rights portion is where freehold and leasehold diverge.
Freehold (所有権) means you own a registered share of the land itself. There is no expiry. No ground rent. You and the other owners collectively hold the dirt.
Leasehold (借地権) means the land is owned by someone else — often a temple, a former landowning family, a corporation, or in rare cases a public body. You hold a contractual right to use that land for a set period. You pay ground rent (地代). When the term ends, the agreement governs what happens next.
Leasehold is not unusual in Tokyo. It is common in older central districts — parts of Minato, Bunkyō (文京区), Shibuya (渋谷区) — where temples and shrines have held land for centuries.
The three types of leasehold you will encounter
Not all leasehold is the same. The legal category matters more than the price.
1. Old-Act leasehold (旧法借地権)
Created under the pre-1992 Land Lease Law (借地法). These contracts are strongly tenant-protective. In practice, the lease is renewable almost indefinitely, and the landowner cannot easily refuse renewal without "justifiable grounds" (正当事由) — which courts interpret strictly.
For a buyer, old-act leasehold behaves closer to freehold than the name suggests. The risk is real but limited.
2. Ordinary leasehold (普通借地権)
Created under the 1992 Land Lease and Building Lease Act (借地借家法). Minimum term is 30 years for buildings, with renewal rights. Like the old act, refusal of renewal requires justifiable grounds. Still tenant-friendly, but slightly less so than old-act contracts.
3. Fixed-term leasehold (定期借地権)
This is the one to study carefully. Introduced in 1992. The term is fixed — typically 50 years or more for residential use — and at expiry, the tenant must return the land, usually after demolishing the building. No renewal. No automatic extension.
If you buy a fixed-term leasehold condo with 32 years remaining, you are buying 32 years of use. Then it ends. The unit's resale value declines toward zero as the clock runs down.
Why leasehold condos trade at a discount
The price gap is not irrational. It reflects measurable risk.
- Ground rent (地代) — typically ¥5,000 to ¥30,000 per month for a Tokyo condo, depending on land size and location. This is on top of management fees and repair reserves.
- Landowner consent fees (承諾料) — when you sell, refinance, or sometimes renovate, you may need the landowner's consent, and that consent often comes with a fee. Transfer consent fees of 10% of the leasehold value are not unusual.
- Renewal fees (更新料) — for ordinary and old-act leasehold, paid every 20 to 30 years. Often equivalent to several years of ground rent.
- Financing friction — many Japanese banks lend less aggressively against leasehold, especially fixed-term. Lower LTV. Shorter loan tenor. Some megabanks decline fixed-term leasehold under 30 years remaining outright.
- Resale liquidity — the buyer pool shrinks. Foreign buyers, in particular, often filter leasehold out entirely.
The analysis result we see at RE : public is that leasehold condos in central Tokyo typically trade at a 20% to 40% discount to comparable freehold, with fixed-term leasehold at the deeper end of that range — and the discount widens as the remaining term shortens.
How to read a leasehold contract before you bid
If you are seriously considering a leasehold unit, request these documents from the agent before submitting a purchase application:
- The land lease agreement (土地賃貸借契約書) itself.
- The registered land title (土地登記簿謄本) showing the landowner.
- A statement of current ground rent and the last revision date.
- The renewal history — when was it last renewed, when is it next due.
- Any side letters governing transfer consent fees, renovation rules, or rebuilding rights.
Then check:
- Type of leasehold — old act, ordinary, or fixed-term.
- Remaining term — and whether the building's expected useful life exceeds it.
- Ground rent escalation clause — fixed, indexed to inflation, or revisable by negotiation.
- Consent fee schedule — what triggers a fee, and how is it calculated.
- Rebuilding rights (建替え) — can the condo association rebuild on the land, and on what terms.
A surprising number of leasehold contracts do not address rebuilding cleanly. For a 1980s building approaching its 60-year mark, this is not theoretical.
Where leasehold can actually make sense
We are not anti-leasehold. The instrument has uses.
You plan to live in the unit for a defined period. If you are in Tokyo for 8 to 15 years and want central-district space at a 30% discount, a fixed-term leasehold with 40+ years remaining can match your horizon well. You consume the use value. You exit before the terminal-decay phase.
You want central location at a budget that freehold cannot reach. A leasehold unit in Azabu (麻布) for ¥90M may sit in a postcode where freehold starts at ¥160M. If location matters more to you than terminal asset value, the trade is rational.
You are buying for use, not capital appreciation. Leasehold is a poor capital-gain vehicle, especially fixed-term. As an owner-occupier with a clear use case, you can ignore that.
Where leasehold is higher risk: as a long-hold investment property, as a legacy asset to pass to children, or as collateral you may need to refinance against in 15 years.
Freehold is not automatically "safe"
A common mistake among foreign buyers is to treat freehold as risk-free. It isn't.
Freehold condos still carry:
- Aging-building risk — the structure depreciates regardless of land tenure.
- Repair-reserve shortfalls (修繕積立金不足) — many older buildings are underfunded for the next major refurbishment cycle.
- Rebuilding deadlock — Japanese law requires a 4/5 owner supermajority to rebuild a condo. In practice, this is hard. Aging freehold condos can become functionally stranded.
- Land-share dilution — your land share may be tiny if the building is dense. The "freehold" portion of a 25㎡ studio in a 200-unit tower is symbolic in resale terms.
The honest comparison is not "leasehold = risky, freehold = safe." It is: what risks are priced in, and which ones are you actually exposed to over your holding period?
A practical decision framework
Run the unit through these five questions before you decide.
- What is your holding period? Under 10 years, leasehold's terminal risk is largely irrelevant. Over 25 years, it dominates.
- What is the remaining term, and what type? Fixed-term under 40 years remaining is a different asset class from old-act leasehold.
- What does the ground rent plus consent-fee structure cost over your holding period? Model it. A ¥15,000/month ground rent over 15 years is ¥2.7M — before any renewal or transfer fee.
- Can you finance it? Talk to at least two lenders before bidding. A "yes" from a buyer's agent is not a loan offer.
- What is the discount versus comparable freehold? If the leasehold discount is under 15%, the risk-adjusted math rarely works. If it is 30%+ and your horizon is short, it can.
What we do at RE : public
When a client sends us a leasehold listing, our analysis covers:
- The lease type, remaining term, and renewal mechanics.
- A reference estimate of the unit's price against comparable freehold and leasehold transactions in the same ward.
- The expected total cost of ownership including ground rent, consent fees, and renewal obligations over the client's stated holding period.
- Financing tendency — which lender categories typically accept the structure, and at what LTV.
- The principal risks, ranked.
We do not tell you to buy or not buy. We give you the second opinion your buyer's agent has no incentive to give.
This is not investment advice. The final decision is yours.