Japan - Property Title Briefing
 
In Japan, a distinction is drawn between the ownership of land and other rights relating to the property. Buildings may be owned or secured separately from the land on which they stand.
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Whilst the public registration system (toki) for immovables is sophisticated, a person searching a register is not entitled to rely on it as Japan follows a system of "public notice" rather than "public reliance" with respect to registration. Prospective purchasers should therefore physically inspect the property, determine who is in possession and even interview neighbours for information they may have concerning ownership of the property. Land boundaries are often unclear resulting in problems with encroachments.
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The rules for creating and dealing with interests in property tend to be straightforward. However, Japan lacks a modern system for the creation and registration of security interests. As a result, Japanese lenders will often rely on the good faith of the owner when taking a security interest over real estate. Real risks exist if the identity of the owner is not fully confirmed.
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Even though standard mortgage contracts give the mortgagee the power to dispose of the property, the mortgagor plays a critical role since the property cannot be transferred without his signature. Reliance on the cooperation of the mortgagor is the most common method for the realisation of mortgaged property in Japan as laws regarding powers of attorney are cumbersome. The alternative public auction route is time-consuming, viewed as a "fire sale" and often disrupted by paid hooligans (boryokudan) or the use of short-term leases to prevent transfer of the possession of the property.
 
Title Insurance
 
Title insurance from First American provides a resilient risk mitigation tool for investors and financiers. Coverage includes the beneficial ownership of the property and the validity and priority of insured mortgages. The premium is a one-off up-front payment on purchase and the policy lasts as long as the ownership of the property or life of the loan.
 

 
For more information on how title insurance can protect you and your clients, please visit our website www.firstam.com.hk or contact us.