Requirements for Refusal to Renew a Building Lease (Legitimate Grounds / "Seito Jiyu")

Plain-language explanation

Article 28 of the Act on Land and Building Leases requires that a landlord who wants to refuse renewal of a building lease, or who wants to terminate a lease with no fixed term, must have "legitimate grounds" (seito jiyu) — not merely a desire to end the tenancy. Courts weigh several factors together: (1) how much the landlord and tenant (including subtenants) each genuinely need to use the building, (2) the history and circumstances of the lease relationship, (3) how the building has actually been used, (4) the physical condition of the building, and (5) whether the landlord has offered to pay relocation/compensation money (立退料, "tachinokiryo").

This provision is designed to protect tenants from being evicted simply because a lease term has expired. In practice, a landlord's claim that they need the space for their own use is rarely sufficient on its own; courts often look favorably on landlords who also offer reasonable compensation money and give tenants adequate time and support to relocate.

For business owners, this article is critical in two directions. If you are a landlord planning to redevelop a building, convert it to another use, or bring in a new tenant, you should expect that ending an existing commercial lease will likely require negotiation and probably payment of compensation — court battles over "legitimate grounds" are common and landlord-favorable outcomes are far from guaranteed. If you are a tenant (e.g., a retail store or office lessee) facing non-renewal, this article gives you real leverage to negotiate for relocation compensation or additional time, since the landlord cannot simply refuse to renew without meeting this legal threshold.

日本語での解説

Common scenarios

• ▸A landlord wants to end a commercial store lease to redevelop the building into a larger property and must negotiate legitimate grounds and compensation with the tenant
• ▸A retail tenant receives a non-renewal notice and disputes it, using Article 28 as leverage to negotiate a higher payout (立退料) before agreeing to vacate
• ▸An office building owner wants to reclaim floor space for the owner's own business use and must demonstrate genuine necessity, not just preference
• ▸A landlord attempts to terminate a periodic (non-fixed-term) lease mid-relationship and must show legitimate grounds rather than simply giving notice
• ▸A property investor purchasing a building with sitting tenants needs to assess how difficult and costly it will be to remove tenants for renovation or resale