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We live in Japan in an urban environment- lots of big apartment building around. The house is post-war house that extended and has an antiquated arrangement whereby a rich person owns the land and we have an informal agreement so we don't pay anything. The rich person died and his son inherited it and after some conversation he agreed to continue the arrangement. I would think anyone would be insane to pay anything for our house- they couldn't be sure that the land owner would keep the arrangement with my wife's family. Of course there is the devil in the details of valuations, but the land is probably worth a lot.

Judging by equivalent situation is our house nearly worthless unless we can shore up some formal legal arrangement with land owner?

Update at 8th March 2023: Father-in-law bought the land but neither told anyone- he is borderline comatose. Mother-in-law was financial ignoramous.

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    This is really a question to a lawyer. In many countries you'd be able to put a claim on the land at this point, but you'll need to talk to a local real estate attorney to know how to proceed.
    – littleadv
    Feb 6 at 8:05
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    @littleadv: I know very little about Japanese real estate law, but since Japan is not a common law country, I'm rather skeptical that they have adverse possession. Even if they did, an "informal arrangement," properly documented, is arguably enough to defeat adversity in most jurisdictions anyway.
    – Kevin
    Feb 6 at 18:20
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    @Kevin - I'm from another country that isn't common law, and we have a ton of laws about stuff like this, like having the right to access roads through someone else's property etc. I honestly have no clue why you think common law would be relevant here.
    – Davor
    Feb 7 at 10:04
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    @Davor: littleadv is specifically talking about adverse possession. Does Japan have that?
    – Kevin
    Feb 7 at 16:03
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    This question seems a bit muddled to me. You're jumping straight to "How much money would I get for the house if we sold it? Probably not much, right? Is there a way I can make it worth more?" But it's not at all clear, at least from my perspective, if you have any right to sell the house at all. How do you know that the rich guy doesn't own the house too? (Disclaimer: I have no idea how property laws work in Japan.)
    – MJ713
    Feb 7 at 23:37

4 Answers 4

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That is quite common in Japan - an average house depreciates to zero in about two decades. And many houses are commonly built on land that belongs to someone else, much like your situation. That's why it is usual to tear down an existing house upon purchase and build a new one.

What keeps the value is the land, which unfortunately does not belong to you.

See e.g. Why Japanese houses have such limited lifespans (The Economist)

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    This is also why Japan has the healthiest real estate market in the world. Houses shouldn't be seen as an investment.
    – JonathanReez
    Feb 6 at 17:47
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    @JonathanReez "Houses shouldn't be seen as an investment." A very simple principle whose value was rather starkly demonstrated to Americans back in 2008. It's a shame so few people noticed, and instead went and immediately inflated a brand new bubble which is now beginning to burst just like the last one.
    – Mason Wheeler
    Feb 6 at 18:56
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    If you view housing as the reason there have been housing bubbles, I'd like to introduce you to my friend, Mr. Tautology. Lending practices make housing bubbles, not the buyers.
    – user26460
    Feb 6 at 23:10
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    @JonathanReez If that was true, then California would not have any housing bubble, which we know is not true. A California house is worth about the same as any house in the country, the value is all in the land. What you're also missing is that Japanese houses are not very durable, they're more like manufactured home quality. This was something carried over from the resource shortages during the post-WWII recovery.
    – user71659
    Feb 6 at 23:25
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    @JonathanReez It might also "help" that the Japanese population is shrinking rather than growing, which does a lot to prevent a housing shortage.
    – gerrit
    Feb 7 at 7:50
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Separating land ownership from structures on the land is a pretty normal process everywhere--it's called a lease. Typically, people pay rent on a lease, but there are other leases based on rendering services in kind, or on up-front payments, or in recompense for past services provided.

Functionally, the situation you have is like having a trailer house on the lot. You own the structure, someone else owns the land. Unlike the West, pre-industrial Japanese houses are pretty disposable, and are frequently demolished and replaced--wood and paper construction built on posts/pylons, with no substantial foundations.

So the demolish/replace cycle was pretty normal prior to Japan's industrialization. A combination of available technology and regular earthquakes resulted in Japan skipping large masonry structures and going straight to steel-frame for larger buildings, and sticking with wood (rather than more permanent cinder-block) for small ones.

In addition to short material lifespans, functional obsolesce probably plays a role--industrialization meant a single lifetime saw the change from traditional open hearth to cast iron stove to gas to electric in a single generation.

Consequently, Japanese houses are cheap to build but costly to maintain, as they are built/maintained with the expectation of being demolished within a lifetime.

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Given your house’s age and location, how much would you pay per month to live there? How much would other people pay to live there?

That can be converted to a Yen value on a long-term lease, which is effectively how much your house is worth.

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Since the other answers appear to have completely missed the overwhelming, elephant-in-the-room point, here's a short answer:

(1) What you describe is not antiquated or exceptional. it's normal.

(2) However, the fact that your agreement is informal is the overwhelming issue.

The answer here can only be:

Run don't walk to a lawyer.

Nothing much else can be said.

Note that your question as such, "how much could I sell this for" is meaningless, due to the apparently informal nature of the arrangement.

Furthermore ...

Regarding the fact that it's informal. As I mentioned in a comment, "shutuku jiku" (spelling?) is a completely commonplace issue to deal with in the Japanese real estate scene.

This is exactly why you need a lawyer right now.

Hence ...

I believe the OP edited this in:

we can shore up some formal legal arrangement with land owner

It's impossible for you to do that. Only lawyers very expert in the issue, who do it all day, can do that.

If it hasn't been mentioned enough already, run don't walk to the best lawyers you can find.

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  • Do you have an example of this being common in London? (I know "leasehold" is common in London but a leaseholder doesn't own the building at all.)
    – user3067860
    Feb 9 at 16:49

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