Some people may be wondering, “Do I still need to use a rental guarantor company even if I have a joint guarantor?” or “What should I do if I don’t want to pay any rental guarantee fee?'”
It is natural to think that if you have a joint guarantor, you don’t need to use a rental guarantor company. However, for most rental properties, using a rental guarantor company is mandatory. In addition, using a rental guarantor company incurs costs, which can be a burden for the tenant.
In this article, we will explain why many properties require using a rental guarantor company and how to find rental properties where it is not necessary to use one.
With properties offered by Village House, it is possible to sign a contract without using a rental guarantor company. Please check out our website if you’re interested.
Rental Guarantor Company: Responsibility of the Tenant
A rental guarantor company (rent guarantee company) is a company that takes on the role of a joint guarantor. Until recently, it was common to have a joint guarantor when renting a property. However, for many people, it has become increasingly difficult to ask parents or relatives to be joint guarantors, either because it’s awkward or because their old age prevents them from being able to serve as guarantors. As a result, the number of cases where people use rental guarantor companies as a substitute for joint guarantors has increased.
On the other hand, some people may find it strange to have to use a rental guarantor company when you have a relative or sibling who can act as a guarantor. However, in recent years, most property contracts require a rental guarantor company.
Even though the rental guarantee fee is paid by the tenant, it is a very convenient service for those who do not have a joint guarantor. The rental guarantee fee for the first year is generally equivalent to 0.5 to 1 month’s rent. From the second year onwards, it is common for the cost to decrease.
Although the details vary depending on the rental guarantor company and the plan, they generally cover not only overdue rent but also costs for restoring the property to its original condition after moving out and the key replacement fees.
Requirements for Serving as a Joint Guarantor and Why You Might Need a Guarantor Company
In recent years, tenants have been increasingly using rental guarantor companies for the following reasons:
Due to the aging of relatives, they are not eligible to serve as guarantors
Those who can become guarantors must meet the following conditions:
- Have a stable job
- Relatives within the second degree of kinship, such as parents, children, brothers, sisters, or grandparents and grandchildren
- Relatives who are not elderly, such as those under 65 years old or with more than 5 years until retirement
- Reachable by phone or email
- Reside in Japan
- Agree to become a guarantor
As mentioned above, the aging population in Japan is leading to a decrease in individuals who meet the conditions to be guarantors. It is common for retired people living on a pension to be deemed ineligible as a guarantor.
The need for rental guarantor companies has increased due to the revision of the Civil Code
The revision of the Civil Code in April 2020 established an upper limit (maximum amount) on the liability amount of a guarantor. If a landlord sets the maximum amount in advance, there is a risk that the actual amount guaranteed will be insufficient.
As a result, it became necessary to include in the contract a clause stating “the guarantor will cover up to ○○ yen.” However, the guarantor might refuse to sign or stamp the document upon seeing this amount. To avoid such complications, many properties now require the use of rental guarantor companies as a standard practice.
Because it is a condition for passing the rental screening process, when using a rental guarantor company, a screening process is conducted. Additionally, depending on the property, it is not uncommon for the rental guarantor company to be responsible for most of the tenant examination.
If the property management company or landlord thinks that you can rent out the property as long you pass the rental guarantor company’s screening, it will be difficult to move in without using a rental guarantor company.
Because the security deposit is reduced
A security deposit refers to the money paid as an initial cost to cover overdue rent or repair costs upon moving out. The amount of a security deposit varies depending on the property, but the average amount is one to two months’ rent.
Recently, there has been an increase in properties that do not require a security deposit, and there is a tendency to set the deposit as low as possible. This is thought to be because the use of rental guarantor companies allows for a reduction in the amount of the security deposit.
Because the use of rental guarantor companies has become common
In 1995, rental guarantor companies appeared in Japan. Before that, it was common to have a joint guarantor when renting a property. However, due to an increase in demand and advancements in legal systems, the use of rental guarantor companies has now become common.
“Guarantor Company Allowed,” Means it’s More Likely Possible to Choose Whether or Not to Use One
If the conditions section states “guarantor company allowed,” it is more likely that you won’t be required to use one. This is because “guarantor company allowed” means that using a rental guarantor company is an option but not a mandatory requirement.
The same applies if there is no mention of using a rental guarantor company. However, since it could be an oversight by the agency, it’s a good idea to check with the real estate agent just to make sure.
Apartment Search Tops: How to Find a Property That Doesn’t Require a Rental Guarantor Company
If you don’t want to use a rental guarantor company, do a property or apartment search where you can sign a contract with just a joint guarantor. Properties that allow rental contracts with a joint guarantor often have conditions listed such as “guarantor company allowed” or “tenant must pay the guarantee fee if a guarantor company is used.”
If you sign a contract with a joint guarantor, there will be a screening process to assess the guarantor’s ability to pay. Please note that the guarantor must also have an annual income of at least 36 times the rent.
Properties That Do Not Require a Rental Guarantor Company Are Rare
Even if you prefer not to use a rental guarantor company, there are few properties where using one is not required. According to data from the Japan Property Management Association, more than 80% of properties on average require the use of a guarantor company. Particularly in the Tokyo metropolitan area, this requirement applies to over 90% of properties
Possible Points of Negotiation: If You Prefer to Avoid a Rental Guarantor Company
If you don’t want to use a rental guarantor company, you can ask the real estate company to negotiate the following points. Depending on the negotiation, you may be able to sign the contract without using a guarantor company.
- Negotiate whether you can sign a contract with just a joint guarantor
If you don’t want to use a rental guarantor company, one option is to negotiate to see if you can sign a contract with just a joint guarantor. If the guarantor is deemed to have sufficient payment ability, you may be exempted from using a guarantor company.
For example, if the guarantor works in a high-income profession such as a doctor or lawyer, or if they are a long-serving government employee, these are cases where negotiations are more likely to be successful.
- Pay two years’ worth of rent in advance
In some cases, you may be able to sign a contract without using a guarantor company by paying the rent in advance. By paying the rent upfront, the landlord has no risk of non-payment during the prepaid period. When negotiating, a minimum of two years’ rent in advance is typically required. However, since there are few properties where such negotiations are possible, it is a good idea to let the real estate company know your wishes in advance.
- Have the landlord cover the rental guarantee fee
If the property has been vacant for a long time, you may be able to negotiate with the landlord to have them cover the rental guarantee fee. There are also cases where the landlord will cover the initial rental guarantee fee as part of a promotion or campaign.
At properties managed by Village House, neither a rental guarantor company nor a joint guarantor is required. In addition, no security deposit or key money is needed, so you can save on initial costs. We offer many reasonably priced and attractive properties starting from around ¥20,000 across Japan. If you don’t want to use a rental guarantor company or want to save on initial costs, please feel free to contact us.
Hello, I’m Machiko Doi, a freelance writer who writes about housing and living in Japan.
I live in an 80-year-old house that I inherited from my grandparents along with my two shelter cats and daughter.
We live a relaxed life while repairing the house.
I like to cook vegetables from the garden and fresh fish caught by my father, and enjoy them with cold beer on a hot day or hot sake on a cold day.