Close Relationship Between Law and Real Estate

Masako Nagamori

Masako Nagamori

1. Real estate and me

(1) Spending more than 30 years involved in real estate

After all is said and done, I have spent my entire career working in real estate, from the time that I got my first job after graduating university to my current age in my mid-50s. Currently, I work as an in-house lawyer in the legal department of Xymax Corporation. Our company conducts business in property management and other areas of real estate, as well as hotels and travel.

Recently, there are more and more opportunities to discuss the work of an in-house lawyer. Although the work varies depending on the corporation, I am a general in-house lawyer. Therefore, I will not discuss my work contents and how I spend the workweek. Instead, I would like to use this opportunity to explain why I find real estate so very interesting. I hope that my passionate discourse on this matter will entice more young people to enter our industry.

(2) My current work

With a focus on real estate management for office buildings, commercial facilities, distribution facilities, and other real estate other than residences, Xymax Corporation conducts fund management, sale, leasing, brokerage, and other business activities of investment property, focusing on major urban areas in Japan. Real estate management which is the main business activity of our corporation can be divided into two types of management: building maintenance (inspection, repair, cleaning, and security for building facilities) and property management (acting as an agent for owners or conducting rental activities; specifically, responding to tenant inquiries, leasing, planning/execution of real estate profit plans, and all other related activities).

This business involves transactions with many property owners and tenants. As a result, we often have to deal with bankruptcy, delinquency in payment, surrender of property, and other typical legal issues related to real estate. Furthermore, many of our business activities require license under the Real Estate Brokerage Act or the Financial Instruments and Exchange Act, as well as other approval of or qualification in such fields as security, construction, and electrical safety. Accordingly, when engaging in business, we must always be aware of business regulations and orders issued by regulatory agencies.

Three years ago, in response to a forecasted increase in tourists coming to Japan, our company started the development/operation of hotels, a tourism business, and operation of chartered buses. Although these types of business are common throughout the world, it is the first time that Xymax Corporation has become involved in tourism. Therefore, from the startup phase, we conducted surveys and developed operating systems while working together with onsite staff. Today, our business is operating smoothly.

(3) Entering law school just before turning 50

I decided to enter the Chuo Law School at the age of 49 because the second real estate company that I had been working at went bankrupt due to the bankruptcy of Lehman Brothers. The first company that I had worked at suffered greatly when the Japanese economic bubble burst, ultimately applying for ADR and becoming the affiliate of other company. Both of the companies had been listed or publicly traded companies, and were developers. Consequently, the companies were particularly susceptible to large economic fluctuations. Perhaps such conditions will continue to repeat themselves in the future as an unavoidable part of history.

Although I had already possessed considerable expertise in real estate, I wanted to improve my legal acumen through a formal education. So I entered a law school, which was a popular career choice at that time. I succeeded in obtaining my legal license, which has led to my current career.

2. Categories of real estate transactions

Some people may have a negative impression of real estate. Actually, it is an important and multifaceted industry. For example, it contains aspects of intellectual business that incorporates financial elements, while at the same time being an essential business that is involved in residences that are part of daily life. Real estate transactions are extremely diverse, with each transaction having its own characteristics, appeal, and players. In the following section, I will introduce some classifications of real estate transactions.
  1. Residences and commercial real estate (offices, commercial facilities, farmland, warehouses, factories, roads, etc.)
    All types of real estate in this classification are forms of essential social infrastructure. However, know-how for development, operation, and management differs according to the usage and intended purpose of the property. Also, different legal regulations apply to each type of real estate.
  2. Sales and leasing
    This is a classification by contracts of the Civil Code. The characteristics of a real estate transaction differ greatly depending on whether it is a sales or leasing transaction. These two types of transactions are necessary for continued and sustainable real estate transactions.
    I view real estate transactions as being based on sales and leasing, with these transactions being supported by developing (contracting) and distribution (brokerage).
  3. Separation of ownership and use
    This is the same as separation of ownership and management as applies to corporation. Application of this concept has led to significant growth in real estate as a business. Since long ago, the terms landlord and tenant have been used when referring to residence. Today, massive investor groups known as funds reign over the real estate investment business in the role of landlords. This is due to a series of laws enacted from the 1990s which enable handling of real estate in the same manner as financial instruments. These changes led to a massive amount of investment in real estate.
    In terms of individuals, real estate assets will always be extremely important in terms of inheritance. Tax treatment is a major factor that influences real estate transactions, and many specialists are requested to apply their expert knowledge in this area.

3. Future trends and issues in real estate

Since long ago, real estate business has always focused on land and buildings. However, just like other industries, a variety of issues have arisen due to changing times. We focus on these new challenges as business opportunities which are the seeds of new business.
  1. Aging population
    The aging of the Japanese population has created problems such as dealing with vacant houses and real properties for which the owner is unknown. This has resulted in the need for the legislation as a countermeasure.
    In addition to the aging population, buildings and facilities throughout Japan are also deteriorating. Generally speaking, the government handles issues related to public facilities. However, in terms of private buildings, it is extremely difficult to deal with deteriorated condominiums and housing complexes. These properties are subject to co-ownership under the Act on Building Unit Ownership, etc. Therefore, it is impossible to reconstruct these properties without agreement from a certain percentage of the co-owners. Although legislation has been enacted, there is the need for diligent work to acquire consent. Consequently, there are great expectations for real estate agents, builders, management firms, and legal institutions in the future. Furthermore, due to difficulties in eviction negotiations with tenants, there are many old buildings which cannot be reconstructed to ensure earthquake resistance. This is an urgent area of need.
  2. Internationalization
    Although real properties themselves do not move, they are still subject to internationalization. Today, an increasing amount of real estate in Japan is being purchased by foreigners and foreign corporations. There are also many cases in which the Japanese owners of a property reside overseas. This creates situations where it is not possible to obtain the certificate of seal impression of parties to a transaction (of course, certificate of seal impression is not issued in foreign countries). This is creating a much greater need for knowledge on governing laws and tax laws.
    In the future, Japan may build casinos with the aim of promoting tourism. There is the high possibility of involvement from major players in the real estate industry.
  3. IT, AI, and other technology
    There is increasing recognition for the concept of a sharing economy. Lodging at private homes (so called Minpaku in Japanese) is now legal. This type of accommodation is made possible through matching performed via the internet. There is the possibility that real estate businesses in Japan will also engage in transaction using internet auctions and forums.
    Moreover, for the time being, Japan is facing a labor shorting. It is therefore essential to reduce management cost by introducing management/cleaning by robots, as well as by remote surveillance and inspection. Xymax Corporation is currently researching these areas.
  4. Changing values
    Reform of working style is attracting great attention in Japan today. This movement creates the advantages of working from home and working via the internet. Our company provides rental office space in major train stations in residential districts of the Tokyo metropolitan area. Some locations also offer childcare services. We are operating this as a new business based on our know-how in building leasing.
  5. Environmental issues
    It is now quite common to pursue energy-saving (particularly electricity) in buildings. In addition to caring for the global environment, it is important to note that saving energy is also pragmatic. The reduction of running costs directly affects the profits of investors.

Close relationship between law and real estate

I hope that I successfully conveyed the diversity and appeal of real estate business to my readers. I would like to close with a personal observation regarding my work. The ability to understand and utilize the law is a huge advantage in this industry. Although I have worked in real estate for more than 30 years, there are still many things which I have yet to learn. There is also an increasing amount of issues in new fields. Moving forward, I will strive to keep my legal knowledge current and to increase my knowledge in IT. By doing so, I hope to equip myself with skills that can be used freely for the benefit of myself and my company.

Finally, please feel free to contact me regarding any questions that you may have regarding real estate. I am always curious and would be happy to provide you with a response after taking the time to investigate your question.
Masako Nagamori

In 1984, Masako Nagamori graduated from the Department of Aesthetics in the Faculty of Letters, the University of Tokyo.
In 1984, she entered employment at Recruit Holdings Co., Ltd.
In 1986, she transferred to Recruit Cosmos Co., Ltd.
In 2005, she entered employment at Noel Co., Ltd.
In 2010, she was enrolled in the Chuo Law School.
In 2013, she completed the Chuo Law School.
In 2013, she passed the national bar examination.
In 2015, she entered employment at Xymax Corporation.
In 2015, she was registered in the 67th class of the Daini Tokyo Bar Association.

・Vice-Chairperson of the Housing Dispute Resolution Committee, Daini Tokyo Bar Association
・Member of the Condominium Rebuilding Project Team, the Housing Dispute Resolution Body Examination Committee, Japan Federation of Bar Associations

Q&A Handbook for Housing Dispute Resolution: Corresponding to the Amended Civil Code and Housing Quality Assurance Act (Gyosei Corporation, edited by Daini Tokyo Bar Association)
Legal Resolution Techniques: OJT Edition (Chuokeizai-sha, edited by Ichiro Ashihara)
JILA Newsletter (Issue No. 4): If I Became Director of my Condominium Association
Daini Tokyo Bar Association: Frontier (May and June, 2017), Construction Guidelines