Japan Property Sale Contract (Baibai Keiyaku) Explained

When buying or selling property in Japan, one of the most critical milestones is signing the Baibai Keiyaku (売買契約) — the formal sale and purchase agreement. For foreigners unfamiliar with Japan's real estate system, this contract can feel intimidating: it is typically written entirely in Japanese, runs dozens of pages, and involves legal obligations that differ significantly from Western practices. This guide breaks down everything you need to know about the Japan property sale contract, from what it covers to what to watch out for as a seller or buyer.

What Is the Baibai Keiyaku?

The Baibai Keiyaku (売買契約書, literally "sale-and-purchase contract") is the legally binding agreement that formalizes the transfer of real estate ownership between a seller and buyer in Japan. It is governed by Japan's Civil Code (民法, Minpō) and the Real Estate Transaction Business Act (宅地建物取引業法).

The contract is bilateral — both parties must sign and affix their personal seal (hanko) or signature. Once signed, both parties are legally committed to the transaction under the terms agreed upon.

Key elements covered in a standard Baibai Keiyaku include:

• Property description — address, lot/floor area, building type, and legal description from the land register
• Sale price — agreed purchase amount and how it will be paid
• Deposit amount — the earnest money (tetsukekin) paid at signing
• Payment schedule — dates for any interim payments and the final settlement
• Closing date — when full payment and title transfer occur
• Conditions and contingencies — such as mortgage approval clauses
• Seller warranties and disclosures — known defects, liens, or encumbrances
• Penalty clauses — consequences if either party backs out

The Important Matters Explanation (Jūyō Jikō Setsumei)

Before you sign the Baibai Keiyaku, Japanese law mandates that the real estate agent provide a Jūyō Jikō Setsumei (重要事項説明書, "Explanation of Important Matters"). This document — often ranging from 20 to 100 pages — must be:

1. Delivered to the buyer (and seller, if applicable) before the contract is signed
2. Read aloud and explained verbally by a licensed Real Estate Transaction Specialist (宅地建物取引士, Takken-shi)
3. Signed and sealed by both the specialist and the buyer

This document contains critical information about:

• Title registration and ownership history
• Any mortgages, liens, or legal encumbrances on the property
• Building code compliance and renovation history
• Land use regulations (e.g., fire zones, flood risks, setback requirements)
• Condominium management rules (for apartments)
• Infrastructure connections (water, gas, sewage)
• Cancellation and penalty conditions

For foreigners: The Jūyō Jikō Setsumei is always in Japanese. You have the right to request a translated summary, but the official document remains in Japanese. Hiring a bilingual real estate agent or a certified translator before this meeting is strongly recommended. See our guide to the legal procedures and documentation for property purchase in Japan for more on required paperwork.

The Earnest Money Deposit (Tetsukekin)

One of the most misunderstood aspects of Japan's property sale contract for foreigners is the Tetsukekin (手付金) — the earnest money deposit paid at the time of signing.

Key points about the tetsukekin:

• Amount: Typically 5–10% of the agreed purchase price (though it can range from ¥100,000 to higher amounts depending on the deal)
• Who receives it: Paid directly to the seller (not held in escrow by a third party — this reflects Japan's trust-based transaction culture)
• What it signals: A firm commitment from the buyer; by paying, the buyer is signaling that they intend to complete the purchase

Cancellation Consequences

The double-refund rule for seller cancellation is a strong legal protection for buyers and a significant financial risk for sellers who change their mind after signing.

Key Clauses in the Japan Property Sale Contract

Understanding the major clauses in the Baibai Keiyaku will help you avoid surprises at signing.

Loan Contingency Clause (Yūshi Tokuyaku)

If the buyer is applying for a home loan (jutaku loan), the contract usually contains a housing loan contingency clause (住宅ローン特約, Yūshi Tokuyaku). This clause protects the buyer if their mortgage application is rejected:

• If the loan is denied within the specified period, the buyer may cancel the contract
• The full deposit is returned with no penalty
• Half of the agent's commission is also returned to the buyer

Buyers signing contracts before official loan approval (common practice in Japan) should ensure this clause is explicitly included.

Defect Disclosure and Seller Warranty (Kashi Tanpo Sekinin)

Under Japan's Civil Code, sellers have a legal obligation to disclose known defects (physical and legal) with the property. The Kashi Tanpo Sekinin (瑕疵担保責任) — seller's warranty against defects — means that if undisclosed defects emerge after the sale, the seller may be liable for repairs or compensation.

Since 2020, this has been updated to Contractual Non-Conformity Liability (契約不適合責任), which expanded buyer protections.

Interim Deposit Clause

Some sellers may request interim deposits (中間金) between signing and final settlement. These are credited against the purchase price and are non-refundable if the buyer cancels without a valid reason.

Settlement Date (Zankin Kessai)

The contract will specify the closing date (残金決済日), when:

• The remaining balance of the purchase price is paid
• Title ownership is officially transferred and registered
• A judicial scrivener (司法書士, Shihoushoshi) facilitates the transfer and registration

The Contract Signing Process: Step by Step

Here is what typically happens on contract signing day:

Revenue stamps (印紙税): These are required on the physical contract to comply with Japan's Stamp Tax Act. The amount depends on the purchase price:

Special Considerations for Foreign Buyers and Sellers

Japan is one of the few advanced economies with no nationality-based restrictions on real estate ownership. Foreigners can buy and sell property with the same legal rights as Japanese citizens. However, there are several procedural differences worth noting.

For Foreign Buyers

• Documents required: Residence card (if residing in Japan), or passport + embassy-certified affidavit (if non-resident)
• Language barrier: Contracts are in Japanese — budget for professional translation or a bilingual agent
• Mortgage restrictions: Without permanent residency, most Japanese banks require a Japanese co-signer, 30%+ down payment, and 3+ years of stable employment history

For a complete overview, see mortgages and home loans for foreigners in Japan.

For Foreign Sellers

• Tax withholding: Non-resident sellers face a 10.21% source withholding tax on sale proceeds, withheld by the buyer at the time of settlement
• Tax representative (Nōzei Kanrinin): Non-residents must appoint a domestic tax agent in Japan before leaving the country
• Power of attorney: If you cannot be present in Japan for signing or closing, you must create a notarized power of attorney document delegating authority to a local representative
• Foreign Exchange Law filing: Under Japan's Foreign Exchange and Foreign Trade Act, foreigners must file a report with the Ministry of Finance within 20 days of signing the contract

The overall selling process typically takes 3–6 months from listing to closing. Real estate agent commission is capped at 3% of the sale price + ¥60,000 (plus consumption tax).

For help understanding what you'll owe after the sale, see our detailed guide on property taxes and annual costs in Japan.

Timeline: From Offer to Closing

Common Mistakes to Avoid

1. Signing without a translator — Never sign the Jūyō Jikō Setsumei or Baibai Keiyaku without understanding its contents. The verbal explanation is in Japanese only.
2. Forgetting the loan contingency clause — If you need a mortgage, confirm this clause is included before signing.
3. Underestimating total costs — Budget for ~10% of the purchase price in additional fees: agent commission, taxes, registration, and judicial scrivener fees. See hidden costs and fees when buying property in Japan.
4. Non-resident seller delays — Prepare the tax representative and power of attorney documents well in advance to avoid holding up closing.
5. Assuming the deposit is in escrow — Unlike in many Western countries, the tetsukekin goes directly to the seller. Choose your transaction partner carefully.

Further Resources

• Complete Guide to Buying Property in Japan as a Foreigner
• Step-by-Step Home Buying Process in Japan
• Can Foreigners Buy Property in Japan?
• Living in Nihon: Buying Property and Mortgage Guide for Foreigners
• Gaijin Buy House: Sell vs. Rent — Property Decision Guide
• For Work in Japan: Housing and Living Guide for Foreigners
• Belonging Japan: How to Sell Your House in Japan as a Foreigner
• Plaza Homes: The Real Estate Purchase Process in Japan
• Aonissin: Complete Guide to Buying Real Estate in Japan

The Japan property sale contract process is structured and predictable once you understand its key elements. With the right agent, proper preparation, and — if needed — professional translation support, both foreign buyers and sellers can navigate the Baibai Keiyaku process smoothly and confidently.