Understanding Japan's Co-guarantor and Guarantee Company System for Foreign Renters

What is a Co-guarantor?

Definition of Co-guarantor

A co-guarantor is someone who assumes equal responsibility with the tenant when the tenant fails to fulfill contractual obligations such as rent payment or property repairs in a rental agreement. This system is established under civil law and carries significant legal weight.

Scope of Co-guarantor Responsibilities

Co-guarantors are responsible for the following:

• Overdue rent: Covering rent payments when tenants cannot pay
• Common area and management fees: Monthly costs beyond rent
• Renewal fees: Costs incurred during contract renewal
• Property restoration costs: Repair expenses upon move-out
• Damages: Compensation for intentional or negligent damage to facilities
• Penalty fees: Penalties for contract violations

Unlike regular guarantors, co-guarantors bear equal responsibility with the tenant. This means landlords or management companies can directly demand payment from co-guarantors without first requesting payment from tenants.

Changes Due to 2020 Civil Code Revision

Important changes were made to the co-guarantor system following the April 2020 civil code revision. The most significant change was the mandatory establishment of a "maximum guarantee amount" (極度額).

Maximum guarantee amount: The upper limit of responsibility that co-guarantors bear; they are not responsible for amounts exceeding this limit.

Typical maximum amounts: Average of approximately 13.2 months' rent, with a median of 12 months' rent

This legal revision introduced mechanisms to prevent unlimited expansion of co-guarantor liability.

The Co-guarantor System for Foreigners

Differences from Overseas Systems

Most countries don't have co-guarantor systems for rental contracts. Instead, the following systems are common:

• Deposit systems: Placing a certain amount as security
• Insurance systems: Taking out rental insurance
• Credit checks: Decisions based solely on personal credit information

Difficulties Faced by Foreigners

Main difficulties foreigners face when finding co-guarantors include:

1. Lack of qualified candidates nearby: Family members often live in home countries
2. Language barriers: Difficulty understanding and explaining the system
3. Building trust relationships: Need for deep trust relationships with Japanese people
4. Income requirements: Conditions often require stable income from Japanese nationals or permanent residents

What is a Guarantee Company?

Basic Mechanism of Guarantee Companies

A guarantee company is a private enterprise that assumes the role of co-guarantor on behalf of tenants. By paying guarantee fees, tenants transfer risks such as rent delinquency to the guarantee company.

The process for using a guarantee company is as follows:

1. Application: Tenant applies to guarantee company
2. Screening: Verification of income, residence status, etc.
3. Contract: Payment of guarantee fees and contract conclusion
4. Guarantee begins: Guarantee starts simultaneously with rental contract

Advantages of Guarantee Companies for Foreigners

Benefits for foreigners include:

• No personal co-guarantor needed: No need to find individual co-guarantors
• Simplified procedures: Relatively simple paperwork processes
• Multilingual support: Support available in foreign languages in some cases
• Ongoing support: Assistance with post-move-in troubles

Disadvantages of Guarantee Companies for Foreigners

Drawbacks include:

• Guarantee fee payments: Additional burden beyond rent
• Credit risk: Delinquency may result in registration with credit information agencies

Types and Characteristics of Guarantee Companies

Guarantee companies are classified into three main categories based on their operating entities and screening criteria.

Credit Card Company-affiliated Guarantee Companies

Characteristics

• Operated by credit card or installment sales companies
• Reference credit information agencies (CIC, JICC, etc.)
• Strict screening criteria

Representative companies

• Orico Forrent Insure
• Epos Card
• Hitachi Capital Consumer Finance

Screening points

• Credit card usage history
• Loan repayment status
• Past financial incidents

LICC-affiliated (Association) Guarantee Companies

Characteristics

• Members of the National Rental Guarantee Business Association (LICC)
• Share databases within the rental guarantee industry
• Moderate screening criteria

Representative companies

• Zenhoren
• J-Lease
• L's Support

Screening points

• Past rent delinquency history
• Previous guarantee company usage
• Balance between income and rent

Independent Guarantee Companies

Characteristics

• Adopt unique screening criteria
• Relatively easier approval process
• Many companies actively support foreigners

Representative companies

• Four Seasons
• Japan Safety
• Casa

Screening points

• Current income situation
• Residence status and period
• Emergency contact availability

How to Choose Guarantee Companies for Foreigners

Confirming Language Support

The most important factor for foreigners is whether support is available in their native language. The following table shows language support status of major foreign-friendly guarantee companies:

Comparing Screening Criteria

It's important to choose appropriate guarantee companies based on foreigners' situations.

For long-term residence status

• Can apply to credit card company-affiliated companies
• Wider range of options available

For short residence periods

• Independent guarantee companies are suitable
• Choose companies specializing in foreigners

For limited Japanese ability

• Choose multilingual support companies
• Select companies with comprehensive support systems

Comparing Guarantee Fees

Costs for using guarantee companies typically include:

Guarantee Company Screening Process

Required Documents

The following documents are generally required for guarantee company screening:

Personal information related

• Passport
• Residence card
• Resident certificate
• Seal certificate

Income verification related

• Employment contract
• Salary statements (latest 3 months)
• Tax withholding certificate
• Bank balance certificate

Others

• Emergency contact
• Application form
• Rental contract (copy)

Screening Period and Process

1. Application (1 day): Submit required documents
2. Document review (2-3 days): Verify submitted documents
3. Phone verification (1 day): Identity confirmation and employment verification
4. Screening result notification (1-2 days): Approval or rejection notice
5. Contract procedures (1 day): Payment of guarantee fees and contract conclusion

Total period: Approximately 1 week

Tips for Passing Screening

Income aspects

• Secure monthly income at least 3 times the rent
• Demonstrate stable employment
• Prove savings balance

Documentation aspects

• Fill out all documents accurately
• Prepare valid documents within expiration dates
• Provide official translations when needed

Communication aspects

• Provide reliable emergency contacts
• Introduce acquaintances who can communicate in Japanese

Handling Troubles

Process When Rent is Overdue

General process when rent becomes overdue:

1. Delinquency occurs: Payment deadline passes
2. Guarantee company covers payment: Payment to landlord (usually within 3-5 business days)
3. Demand to tenant: Payment request from guarantee company to tenant
4. Collection: Collection activities if unpaid
5. Legal procedures: Eventually eviction requests, etc.

Importance of Early Response

When delinquency occurs, the following points are important:

• Early contact: Consult with guarantee company when delinquency is anticipated
• Installment payment consultation: Consultation when lump sum repayment is difficult
• Explanation of cause: Clear explanation of delinquency reasons

Important Points When Contracting

Key Items in Contracts

Important items to verify when contracting with guarantee companies:

Guarantee scope

• What besides rent is guaranteed
• Guarantee period limitations
• Content of exemption clauses

Cost-related

• Calculation method for initial guarantee fees
• Payment conditions for renewal fees
• Possibility of additional costs

Cancellation conditions

• Possibility of mid-term cancellation
• Settlement method upon cancellation
• Contract renewal conditions

Utilizing Multilingual Support

To understand contract contents, utilize the following support:

• Interpretation services: Interpreters provided by guarantee companies
• Translation services: Contract translation services
• Consultation desks: Confirm post-move-in consultation desks

Alternatives to Guarantee Companies

Institutional Guarantee Systems

Some institutions provide guarantee services for affiliated foreigners:

Universities:

• Guarantee systems for international students
• Introduction of partner guarantee companies

Companies:

• Housing guarantee systems for employees
• Corporate contract guarantees

Public institutions:

• Municipal foreign resident support systems
• International exchange association guarantee systems

Guarantor Agency Services

Specialized guarantor agency services also exist:

• NPO guarantees
• International exchange organization support
• Professional agency services

Conclusion

While Japan's co-guarantor and guarantee company systems are complex for foreigners renting property, proper understanding and preparation can lead to smooth contracts.

Key Points for Co-guarantors and Guarantee Companies

1. System understanding: Differences and roles of co-guarantors and guarantee companies
2. Appropriate selection: Choosing guarantee companies suited to your situation
3. Document preparation: Advance preparation and accurate completion of required documents
4. Language support: Selecting companies offering native language support
5. Ongoing relationships: Maintaining good relationships after move-in

When in doubt, consult with multilingual real estate companies or guarantee companies.