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Issues of Rent 1: request for decrease

Can a business operator request a lessor of a building to decrease the rent for a room in a building, because it ran into financial difficulty by drop in sales caused by its compliance with a request from a prefectural governor for suspension of business based on the declaration of a state of emergency issued to prevent the spread of COVID-19 infection?

The lease contract for a room in a building is subject to Act on Land and Building Leases and the lessee can request for decrease in rent for a room as a part of the building to the future regardless of the terms and conditions in the lease contract (paragraph 1, Article 32 of the Act).

However, the Act grants the lessee the right to request for decrease in rent in the event that the building rent becomes unreasonable "in comparison to the rents on similar buildings in the vicinity" as a result of "increase or decrease in tax and other burdens relating to the building" and "the rise or fall of building prices or fluctuations in other economic circumstances"; and the Act does not provide the event of "worsening business conditions of the lessee" as a ground for the request. Therefore, in order to request for the decrease in rent pursuant to the Act, the lessee needs to show the rent became unreasonably high based on the statutory requirements.

Even if the request for the decrease in rent was made, the lessor may require the payment of the previous rent until the parties finally agree to decrease the rent or until the court justifies the decrease. Then, the lessee's failure of paying the previous rent is deemed to be a breach of the lease contract. Even if the lessee cannot show the statutory requirements, it may be possible for the lessee to ask for some grace period for all or part of the rent by informing the lessor of the lessee's difficulty in rent payment, or to ask for deduction of money from a security deposit as the rent payment as an interim measure.

If the parties are unable to reach an agreement to decrease the rent of the building, a petition for a conciliation procedure can be filed with a summary court (or a district court by the agreement of the parties) having jurisdiction over the location of the building. Only when the parties failed to reach an agreement even through the conciliation procedure, a lawsuit claiming for decreasing the rent can be filed. In the conciliation procedure, decrease of the rent can be requested regardless of the existence of statutory requirements, and so long as the lessor agrees, an agreement on decrease in the rent can be executed as an official document. However, in a lawsuit, the existence of the statutory requirements will be the subject of the claim and it will be difficult for the lessee to obtain a decision to decrease in the rent without evidence supporting the statutory requirements.

It should be noted that the above-mentioned right to request for decrease in rent can be excluded as a special agreement in a building lease contract without contract renewal (fixed-term building lease). However, if the lessor failed to explain to the lessee in advance that the building lease contract will not be renewed and will be terminated by reason of the expiration of the period by delivering a written statement to that effect, the provisions of the contract being not to be renewed are invalid and the special agreement excluding the right to request for decrease in rent also become invalid.

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