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Murder! Yakuza! Cults! What Are Stigmatized Properties?

Japan real estate stigmatized properties

A stigmatised property (事故物件, jikobukken) is real estate in which something very bad or controversial happened in the recent past. Stigmatised properties have special financial and legal implications.

There are several different reasons a property can become stigmatized:

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    Perhaps there was an unnatural death there: a murder, a suicide, or a “lonely death” (孤独死, kodokushi). A kodokushi is when someone died of natural causes, but no one discovered the body for a while. Not all deaths count. If someone elderly passed away at home surrounded by friends and family, the property is not “stigmatized.”

  • Or maybe no one died there. Instead, a dangerous/anti-social group (yakuza, a cult, etc.) used or owned the piece of real estate.
  • People could associate the property with negative superstitions. For example, it could be next to a graveyard, funeral parlor, or crematorium. It could also be on the 4th or 9th floors. Both numbers have negative connotations, similar to 13 in Western culture. One can pronounce “four” “shi” (四), which is the same pronunciation as 死 (“death”). “Nine” (九, ku) sounds like the word for “painful; difficult; tough; hard” (苦しい, kurushii). Japanese tenants also consider east-facing properties more desirable; those that face other directions, less so.
  • It could have been built on top of a well. Or it could have other potentially dangerous issues such as asbestos or gas leaks. It might have been the site of a fire, flood, or other natural disaster in the past.
  • Maybe nothing is “wrong” with the property. It has simply had extremely high tenant turnover for unspecified or even perfectly innocuous reasons.

Stigmatized Properties: The Law

By law, a real estate agent must inform a prospective tenant if, during the previous occupancy, anything stigmatizing occurred. This is usually done in the Explanation of Important Matters (重要事項説明書, Jūyō Jikō Setsumeisho). This is the legal minimum. Failure to do so could result in a heavy fine or loss of license. The renter deciding to move out nullifies the real estate contract. A tenant who did not receive information about it beforehand can sue for damages in court. The grounds can be, for example, “residual odours” (e.g. from a decomposing corpse) or psychological symptoms.

Tenants have won such cases in court. The courts have judged that renters must be told if an incident occurred on the property within the past two, five, ten, or even 20 years. Based on these various precedents, most sellers and real estate agents generally adhere to a ten-year period. If something awful happened within the past ten years, they will notify the prospective renter, at least if asked.

Occasionally, unscrupulous real estate agents cover it up. They have someone rent the property briefly, so that they can stretch the truth and tell tenants that “nothing noteworthy happened during the previous occupancy.” For example, if there is a suicide, a less honest real estate agent might have one of his employees rent the unit, or pay/offer a discount or free rent to someone to live in the unit briefly. After that person has “moved out,” he can tell clients “during the last occupancy, nothing particularly bad occurred.” However, this is risky. Most real estate agents worth their salt will not do this.

What Are the Pros and Cons of Owning a Stigmatised Property?

Pros:

  • Lower purchase price: stigmatised properties can go for as low as one-quarter of their original value. Eventually, the unit will become legally de-stigmatised. Then the price will come in line with other properties with no history of stigmatisation. It is just a waiting game. Find a tenant for the unit, perhaps offering a discount. When he or she moves out, or perhaps after waiting for a certain period of time (e.g. ten years), then there is no legal requirement to declare the property “stigmatised” anymore. To be fair, Japan has had inhabitants living in it for thousands of years. Nearly every nook and cranny has had someone die in it, or been the site of something amiss.
  • Morbid fascination: death is an interesting part of life and every now and again, it happens at home.

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Cons (“Bumps” in the night aside):

  • You might receive lower rent from tenants for a while: typically 20% lower. Tenants may perceive residual smells a turnoff, or hold superstitions.
  • Legal requirement to notify renters of what happened
  • More difficulty in getting a mortgage or getting a mortgage for the desired amount
  • Difficulty in reselling the property in the future, especially if the incident was on the news or the subject of local gossip

How to Find Stigmatised Properties

You can ask your real estate agent. Better yet, ask real estate agent and residents in the neighbourhood. Get information from multiple sources. It will help you get a feel for the neighbourhood and its history. It will also let you know what kind of real estate agent you are dealing with.

Take a look around the property. Does anything seem oddly new? The toilet is ancient. Why is the bathtub so new? The wallpaper is dirty and peeling. Why is the floor sparkling? Ask your real estate agent.

Can One Use Stigmatised Properties as a Bargaining Chip?

You should expect to pay less for a stigmatised property than other comparable properties. This can be as little as a quarter of the price. Be careful, though. When comparing with nearby units, they might also have received a stigma by the same factor. For example, if all the units look out over the same cemetery. Caveat emptor, because renters will pay less on average for a stigmatised property. This should only be temporary unless something really, really bad happened on the property, though. This is because after one tenant has lived there, or generally at most after ten years, there will be no need to notify future tenants. It will effectively not be stigmatised anymore unless a crime so heinous occurred there that the neighbours will not stop talking about it a decade or more later.

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What If Something Terrible Happens in a Property I Am Renting Out?

It is unlikely that any one tenant will meet an unfortunate end during a two-year rental contract. However, the more units and renters you have, especially elderly ones living alone, the higher the chances. In the event something happens, amongst the sadness and shock, there is a silver lining. You have the legal right to continue charging rent until the body and the possessions of the deceased have been removed and until the unit has been cleaned up. The cleanup is the tenant’s financial responsibility. The family or renter’s insurance can cover it. For example, Affordia Insurance will pay up to six months’ rent if such an event occurs.

With over 30,000 suicides per year, a landlord must be prepared. In the event of a suicide, the landlord has the right to charge the family to renovate the property. He can also charge them for damages resulting from the property becoming stigmatised (e.g. the rent he or she can charge being lower in the future).

Conclusion

Stigmatised properties are harder to rent out and sell. However, they are also cheaper to acquire. With time or enough tenants between the incident and now, they will usually cease to be stigmatised. Then they can appreciate significantly in value. However, it is important to understand the legal consequences, and the bargaining position of future tenants and/or buyers. Do not buy such a property without understanding these in advance. If tragedy should strike and his or her property becomes stigmatised, a landlord has redress in the courts and through insurance policies.

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