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What’s The Deal With Key Money?

It's time this outdated practice is stopped. Only rent from landlords who don't charge any key money.

By 4 min read

One of the most common complaints people have when moving in Japan is just how expensive it is, particularly in the big cities, where seemingly endless fees can sometimes mean you’re paying up to six months rent before you’ve even moved in and had a chance to buy furniture.

Japanese companies love fees and real estate companies are especially good at creating all sorts of creative ways of getting your money. Guarantor fee, lock changing fee, cleaning fee, maintenance fee, agency fee, etc.

Of all the fees that you will have to pay the one that everyone seems to hate the most is key money. The dreaded reikin (礼金) or ‘key money’ is a non-refundable fee that dates back to the Kanto Earthquake. Much of Tokyo was destroyed by the earthquake and so landlords were in an enviable position of choosing who they rented their property to.

To try and skip to the head of the line and win the favor of the landlord many people would offer a small payment to express gratitude for letting you live on their property. (Reikin literally means ‘gratitude money’)

Even though the earthquake was almost 100 years ago, and the country now has around 54 million housing units of which 13% are unoccupied, the Japanese rental market and its landlords like to preserve this tradition. And why wouldn’t they? At the peak of Japan’s real estate bubble, renters might have given up to a year’s rent to their landlord as a moving-in ‘gift’ and, though the price of key money has decreased since then, owners can still charge up to 3 months key money for apartments in the more up market areas of Tokyo.

So, if you’re looking at properties the chances are that you’ve seen this alarming term being bandied about quite a bit. But luckily there are ways to reduce the cost of key money or, better still, avoid paying it all together.

1. Look at apartments that don’t require you to pay key money

There’s been a steady change in the system of transaction fees across the housing market over the past few years, which means that the number of properties that require key money has decreased. However according to JapanToday, 72% of apartments listed for rent in Tokyo’s 23 Wards back in 2010 did require key money. This may sound high but it is 17.8% lower than in 2007.

Many agencies now are moving towards eliminating key money, especially for tenants that hold a foreign passport. GaijinPot Apartments has a large list of no key money apartments for rent.

If there’s a particular building or area that you like, you can also watch for ‘0’ key money campaigns where agencies will drop the fee for a limited time to attract tenants.

2. Negotiate key money by offering to pay higher rent

A common practice in Japan is offering to pay rent at a higher rate if the landlord agrees to waiver the key money fee. Some landlords deliberately list their property at a below-market fee with a higher key money deposit in anticipation of this kind of negotiation with the tenant.

You can expect to pay at least 10,000 – 30,000 yen more per month which may or may not save you money, depending on how long you plan to stay in the property.

3. Consider shared housing or an apartment rental company

Since shared houses are already set-up, there’s usually no key money and costs are generally lower, as long as you don’t mind dealing with other people’s weird night-time habits, or them dealing with yours. 

There’s also rental companies like Leopalace which provides small, furnished apartments for no key money. Living in a Leopalace is a bit like living in a polyester box created by a cruel Sims player but it’s a great exercise in learning how to utilise space – who knew that a washing machine made such a good chopping board?

Given the economic situation in Japan, it’s becoming difficult for landlords and agencies to continue to justify these kinds of non-essential fees and the good news is we’re definitely seeing a reduction in the number of apartments demanding key money.

For more information on moving costs in Japan and more, check out the GaijinPot apartments section.

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  • Barnaby Jones says:

    What annoys me the most about key money is that many of these houses are still in the same state they were right after the earthquake 🙂 There’s lots of old buildings without proper heating or insulation, cold damp walls, no proper kitchen, etc.

  • maulinator says:

    YOu will find that in 90% of the cases, if you are willing to negotiate, the first thing to go is the key money. I have never paid key money and in all cases I have rented apartments that intially required it. It might be a function of the area where I live where rents are higher than average for Tokyo, but all the landlords I have dealt with are happy to ignore key money, and usually lower the rent about 10-20%. Sometimes they get with with a renewal fee, if you stay more than 2 years, but that is usually one month rent and if you threaten to move, they will usually let that go too. Better to have steady income than risk it for a measly extra month of rent.
    When negotiating for an apartment tell the landord upfront that there will be no key money and do something about the monthly rent. Be polite, well dressed and look the part of a professional, but always be aggressive. The worst thing that can happen is the landlord says no and you continue your search. Your realtor should be doing most of the negotiating anyway, that is why you are paying them. Remember the realtor does nto get paid unless the deal is signed, so he/she will be working both sides. A good realtor will be a godsend in many cases especially for foreigners. Look for realtors who are “down with the program.”
    So my recommendation is don’t limit yourself to no key money apartments. Always look to megotiate. ASk your relator about the bakground of the property. If the apartment has been on the market for a while they landlord is more desperate. Look to move year end, the land lords tend to be more desperate then. Avoid moving in March and April. That is when everyone moves.

  • kayumochi says:

    seems just like yesterday we had to cough up 40,000 yen just to get a landline installed …

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