In Japan, before finalizing a rental contract, tenants are required to participate in a process known as the Explanation of Important Matters. Far from being a mere formality, this step plays a critical role in ensuring that the tenant fully understands their responsibilities, rights, and associated costs before signing the lease.

This explanation is especially valuable for first-time renters or those who may feel uncertain about the contract terms. It offers a vital opportunity to ask questions and clarify any points of confusion, helping to prevent future disputes or misunderstandings.

This article provides a practical overview of what the Explanation of Important Matters entails, the key topics it covers, and the essential points tenants should confirm during this process.

What Is the “Explanation of Important Matters”

The Explanation of Important Matters is a legally mandated process in which a licensed real estate professional—known as a Real Estate Transaction Specialist—provides a prospective tenant with a comprehensive explanation of the lease terms before the contract is signed.

This requirement is stipulated under Japan’s Real Estate Transaction Act and must be conducted both verbally and in writing. Only after the tenant has reviewed, signed, and stamped the explanation document can the lease agreement proceed. Far from being a formality, this explanation serves as a critical legal prerequisite for entering into the rental contract.

When Is the Explanation of Important Matters Provided?

The Explanation of Important Matters typically takes place after the rental application has been submitted and the landlord’s screening process has been completed—but before the lease agreement is officially signed. In most cases, this explanation is conducted on the same day as the contract signing. However, prospective tenants may also request to receive the explanation in advance.

This option is particularly beneficial for those who wish to thoroughly review the terms, or consult with family members previously. By requesting the explanation first—“I’d like to hear the explanation before making a final decision”—tenants can gain a clearer understanding of the contract through a licensed professional, and take the necessary time to evaluate the terms with confidence.

Key Information Included in the Explanation of Important Matters

The Explanation of Important Matters must be delivered both in written form and verbally by a licensed Real Estate Transaction Specialist. The written document outlines the following essential details, which must be explained one by one:

Property Overview

• Property address, structure, year built, exclusive-use floor area

• Registered ownership as per official property records

• Legal restrictions or designated use of the building/unit

Lease Conditions

• Rent, common area fees, security deposit, key money, and guaranty money—amounts and payment methods

• Contract term and renewal conditions

• Termination process and required notice period

Special Clauses Regarding Costs

• Presence and amount of renewal fees

• Responsibility for cleaning and restoration costs upon move-out

• Any penalties for early termination or breach of contract

Rules During Tenancy

• Whether pets, musical instruments, or business use are permitted

• Smoking and renovation policies

Important Legal Restrictions

• Lease classification under Japan’s Land and Building Lease Act (standard vs. fixed-term lease)

• Whether renewal is allowed and how the lease is handled upon expiration

Why Is the Explanation of Important Matters So Essential?

The Explanation of Important Matters exists to prevent situations where tenants unknowingly enter into contracts without fully understanding their terms. It ensures that tenants are fully informed of their rights and obligations before signing—creating the foundation for a fair and transparent transaction.

Overlooking this process can lead to several significant issues, such as:

• Unexpected charges at move-out, including cleaning fees or penalties for early termination

• Discovering that the lease cannot be renewed, forcing relocation

• Discrepancies between what was verbally communicated and the actual written terms of the agreement

Key Points Tenants Should Confirm During the Explanation of Important Matters

When reviewing the Explanation of Important Matters, tenants are strongly advised to pay particular attention to the following areas:

Financial Arrangements

• Details on refundable deposits (e.g., security deposit) and any deductions that may apply at move-out

• Whether renewal fees are required and the specific amounts

• Conditions and amounts of penalties for early termination

Type of Lease Agreement

• Whether the lease is a Fixed-Term Lease or a Standard Lease
  → Fixed-term leases may not be renewable upon expiration

Prohibited Actions and Associated Penalties

• What activities are explicitly prohibited

• What actions the landlord may take in the event of a violation

Special Clauses

• Are there any special conditions beyond standard terms?
  (e.g., “Tenant is responsible for air conditioner cleaning costs”)

If any part of the documentation is unclear or vaguely worded, do not hesitate to request a detailed explanation from the agent.

How to Handle Questions During the Explanation of Important Matters

The Explanation of Important Matters is finalized when the tenant provides their signature and personal seal, confirming they have received and understood the explanation. However, if there are any unclear or concerning points, tenants are not obligated to sign immediately.

If anything feels uncertain or requires further consideration, it is entirely acceptable to say, “I’d like to review this first before signing.” Taking the time to consult with family members or trusted advisors is also encouraged. Rushing into an agreement without full clarity can lead to regret later.

Final Note: The Most Effective Protection Before Signing a Lease

The Explanation of Important Matters is your most critical opportunity to prevent misunderstandings that, once the lease is signed, cannot be easily reversed. It is not just a formality—it is your final chance to clearly understand the terms that will directly impact your living conditions and financial responsibilities.

Approach the explanation with care and composure. If anything is unclear, ask questions on the spot and, if necessary, request written or email confirmation. By doing so, you can make your rental decision with confidence and begin your new life with peace of mind.