Defining Secured Debt: What Claims Can Your Japanese Mortgage (抵当権) Cover?

When a lender takes a mortgage (抵当権 - teitōken) over real property in Japan, the cornerstone of this security is the underlying debt or obligation it intends to secure (被担保債権 - hi-tanpo saiken). The effectiveness and enforceability of the mortgage, particularly against third parties, hinge significantly on how this secured claim is defined, documented, and registered. Japanese law allows for a range of claims to be secured by an ordinary mortgage, but specific rules regarding their nature and the required level of specificity in their description must be carefully observed.

General Principles of Secured Claims under a Japanese Ordinary Mortgage

Two fundamental principles govern the relationship between a Japanese ordinary mortgage and the claim it secures:

1. Accessory Nature (付従性 - Fujūsei): An ordinary mortgage is 'accessory' to the secured claim. This means that the mortgage's existence is dependent on the existence of the underlying claim. If the claim is invalid, extinguished (e.g., through repayment), or otherwise ceases to exist, the mortgage generally also ceases to exist.
2. Specificity for Perfection (特定性 - Tokuteisei): While a mortgage agreement is valid between the contracting parties, to make the mortgage effective against third parties (such as other creditors, subsequent purchasers, or a bankruptcy trustee), the secured claim must be identified with sufficient specificity in the mortgage registration. This public registration provides notice to the world of the extent of the encumbrance.

Types of Claims Securable by an Ordinary Mortgage (普通抵当権)

Japanese law is relatively flexible regarding the types of claims that can be secured by an ordinary mortgage, provided they meet the criteria of being identifiable and, for enforcement purposes, ultimately quantifiable in monetary terms.

1. Monetary Claims (金銭債権 - Kinsen Saiken)

This is the most straightforward and common category. Examples include:

• Standard loan agreements (金銭消費貸借 - kinsen shōhi taishaku).
• Claims for reimbursement arising from loan agreements (e.g., if a guarantor pays the loan and seeks reimbursement from the principal debtor, and this reimbursement right is itself secured) (金銭消費貸借に基づく求償債権 - kinsen shōhi taishaku ni motozuku kyūshō saiken).
• Claims arising from loan commitments or agreements for future loans (金銭消費貸借予約 - kinsen shōhi taishaku yoyaku).
• Obligations under installment loan agreements (分割貸付 - bunkatsu kashitsuke).
• Drawings under credit line agreements, where each drawing forms a specific debt (限度貸付 - gendo kashitsuke).
• Obligations arising from a "quasi-loan agreement" (準消費貸借 - jun shōhi taishaku), where parties agree to treat an existing monetary obligation (e.g., from a sales contract) as a loan.

2. Future Claims (将来債権 - Shōrai Saiken) and Conditional Claims (条件付債権 - Jōkentsuki Saiken)

Japanese law generally permits an ordinary mortgage to secure claims that are not yet in existence or are conditional upon a future event, as long as the basis for their eventual accrual is clearly defined and they can be adequately specified for registration purposes. The legal precedents have evolved to recognize the validity of mortgages securing such future claims, for example, rights to reimbursement that will arise if a guarantor has to pay, or claims for damages that may arise from a specific contractual relationship. The key is that the potential for their occurrence and their basis must be specific enough to be identified.

3. Non-Monetary Claims (非金銭債権 - Hi-kinsen Saiken)

While less common for standard mortgages, certain non-monetary obligations can also be secured, provided they can be valued in monetary terms for the purpose of enforcement (i.e., if the property is auctioned, the claim must be converted to a monetary amount for distribution). For example, a claim for the delivery of a specific quantity of goods under a sales contract (e.g., "delivery claim for petroleum under sales contract dated YYYY/MM/DD") can be secured.

4. Claims Arising from Various Specific Contracts and Legal Relationships

The range of underlying "causes" for a secured claim is broad. Registrable causes (which define the secured claim) include:

• Guarantee-related claims (保証関係):
  • Obligations under a direct guarantee agreement (保証契約 - hoshō keiyaku).
  • Claims arising from a guarantee commission agreement (保証委託契約 - hoshō itaku keiyaku).
  • Critically, future reimbursement claims that a guarantor will have against the principal debtor if the guarantor fulfills the guarantee (保証委託契約による求償債権 - hoshō itaku keiyaku ni yoru kyūshō saiken). This is a common structure where a mortgage is established from the outset to secure this contingent future claim of the guarantor.
  • Claims for guarantee fees payable under a guarantee commission agreement (保証委託契約による保証料債権 - hoshō itaku keiyaku ni yoru hoshōryō saiken).
• Lease-related claims (賃貸借関係):
  • Claims for future rent payments under a lease agreement (賃貸借契約による賃料債権 - chintaishaku keiyaku ni yoru chinryō saiken).
  • A tenant's claim for the return of a security deposit upon lease termination (賃貸借契約の保証金返還債権 - chintaishaku keiyaku no hoshōkin henkan saiken).
  • Obligations arising under lease financing agreements (リース契約 - rīsu keiyaku).
• Sales-related claims (売買関係):
  • A buyer's claim for the return of a down payment (手付金返還債権 - tetsukekin henkan saiken).
  • A seller's claim for the outstanding purchase price (売買代金 - baibai daikin).
  • A buyer's claim for a refund of the purchase price (e.g., upon rescission) (売買の代金返還債権 - baibai no daikin henkan saiken).
• Other Contractual or Legally Recognized Claims:
  • Claims established by a formal debt acknowledgment agreement (債務承認契約 - saimu shōnin keiyaku).
  • Claims arising from a novation agreement (債務更改契約 - saimu kōkai keiyaku) where an old debt is replaced by a new one.
  • Claims acquired through a valid assignment of claims (債権譲渡に係る債権 - saiken jōto ni kakaru saiken).
  • Obligations under certain types of indemnity agreements (身元引受契約 - mimoto hikiuke keiyaku).
  • Obligations established by a formal settlement agreement (和解契約 - wakai keiyaku).
  • Claims for the return of unjust enrichment (不当利得返還債権 - futō ritoku henkan saiken).
  • Claims for damages arising from tort or breach of contract (損害賠償債権 - songai baishō saiken).
  • Monetary claims arising from property division in divorce proceedings (財産分与 - zaisan bun'yo).
  • Claims for alimony or spousal/child support (扶養料債権 - fuyōryō saiken).
  • Claims for consolation money or damages for emotional distress (慰謝料債権 - isharyō saiken).
  • Claims arising from promissory notes (約束手形債権 - yakusoku tegata saiken).

This list illustrates the breadth of obligations that can, in principle, be secured by an ordinary mortgage, provided they are properly defined and identified.

The Crucial Requirement of Specificity (特定性 - Tokuteisei) in Registration

For a mortgage to be validly registered and therefore effective against third parties, the secured claim(s) must be described with a reasonable degree of specificity in the registration application and, consequently, on the property register. This public notice allows third parties (like potential buyers or other creditors) to assess the nature and extent of the encumbrance on the property.

Debt Acknowledgment Agreement (債務承認契約) vs. Debt Payment Agreement (債務弁済契約):
A subtle but important distinction exists regarding the registrability of claims based on these two types of agreements:

• A Debt Acknowledgment Agreement (saimu shōnin keiyaku) can serve as the basis for a registrable secured claim if the agreement itself operates to create or confirm a distinct, new, or newly consolidated debt obligation. For example, if parties with a history of complex or disputed transactions enter into an agreement that acknowledges a specific, final sum currently owed, effectively superseding or clarifying prior undefined balances, this "acknowledged debt" can be the claim secured by a new mortgage. The key is that the agreement itself is seen as giving rise to (or definitively establishing) the specific obligation being secured.
• In contrast, a mere Debt Payment Agreement (saimu bensai keiyaku) that only outlines a schedule or method for repaying an already existing, clearly defined debt (without altering its fundamental nature or creating a new debt) is generally not itself registrable as the "cause" of the secured claim. In such cases, the mortgage should properly identify the original agreement or event that gave rise to the debt being repaid. The payment agreement merely details how an established obligation is to be discharged.

Illustrative Examples from Housing Loans:
The level of specificity often required is exemplified by how secured claims are described for certain Japanese housing loan products. For instance, under the "Flat 35" program:

• For a "purchased loan" type (where the loan is originated by a private bank and then sold to a government agency), the registered secured claim might be described as: "Claim pertaining to assignment of claim dated YYYY/MM/DD (original contract: monetary loan agreement of same date, assignor: XYZ Bank)".
• For a "guaranteed loan" type (where the agency guarantees a bank's loan and takes security for its potential reimbursement claim if it pays out on the guarantee), the description might be: "Reimbursement claim pertaining to reimbursement agreement dated YYYY/MM/DD".
  These examples highlight the need to precisely identify the legal basis and nature of the claim being secured.

Securing a Portion of a Claim or Multiple Distinct Claims

• Securing Part of a Larger Claim (債権の一部担保 - Saiken no Ichibu Tanpo): It is permissible to establish a mortgage to secure only a portion of a larger existing debt. The registration would then clearly state this, for instance, "JPY X million out of a JPY Y million monetary loan agreement dated [Date]". This might be done for practical reasons, such as when the collateral's value is insufficient to cover the entire debt, and the parties wish to limit the registered secured amount (and correspondingly, the registration tax payable, which is based on the secured amount).
• Securing Multiple Distinct Claims (複数の債権担保 - Fukusū no Saiken Tanpo): A single ordinary mortgage can be used to secure multiple separate claims, provided they are all owed by the same debtor to the same creditor. In the registration, these distinct claims are typically itemized and identified with symbols (e.g., "(a) Monetary loan dated... for JPY X," "(b) Guarantee obligation dated... for JPY Y"). The interest rates and other terms applicable to each distinct secured claim are also detailed. If one of the secured claims is later extinguished (e.g., repaid), a registration of alteration of the mortgage is made to remove that specific claim from the mortgage's scope. Generally, if multiple creditors hold entirely separate claims, they cannot be bundled under a single ordinary mortgage unless they are quasi-co-owning a single underlying obligation (as might occur in some syndicated loan participation structures).

Scope of Security: Principal, Interest, and Default Damages

An ordinary mortgage secures the principal amount of the debt. It also covers agreed-upon interest and default damages (遅延損害金 - chien songaikin). However, a significant limitation under Article 375 of the Civil Code applies when considering priority against junior mortgagees or other subordinate third parties. In such contests, the preferential claim for interest and default damages that can be recovered from the auction proceeds of the mortgaged property is generally capped at the amounts that accrued during the last two years before the commencement of the auction proceedings. Overdue interest can, however, be capitalized (i.e., added to the principal) by a specific agreement and a corresponding registration of alteration of the mortgage. This "new" principal, including the capitalized interest, would then be fully secured, though additional registration tax (0.4% of the increase) would apply to the capitalized amount.

Securing Claims Denominated in Foreign Currency (外国債権 - Gaikoku Saiken)

If the debt to be secured is denominated in a foreign currency, Japanese registration practice requires a dual declaration for clarity and for calculating domestic taxes and potential distributions. The registration must state both the foreign currency amount of the claim (e.g., "USD X million") and a "security limit amount" (担保限度額 - tanpo gendo gaku) expressed in Japanese Yen (Real Property Registration Order, Article 3(xiii); Real Property Registration Act, Article 83(1)(v)). This Yen-denominated limit can be based on the prevailing exchange rate at the time of the registration application or an amount agreed upon by the parties.

Impact of Partial Repayment Occurring Before Mortgage Registration

If a portion of the loan is repaid after the loan and mortgage agreements are signed but before the mortgage is actually registered, the parties have a choice: the mortgage can be registered for the original full loan amount, or it can be registered for the current outstanding balance. If the latter approach is taken (registering for the reduced, current balance), it is imperative that the proof of the cause of registration (e.g., the combined loan and mortgage agreement) is supplemented with clear evidence of the partial repayment. This could be an endorsement (奥書 - okugaki) made directly on the agreement or a separate, duly executed receipt or acknowledgment of partial payment, which should be submitted with the application. Without this, a discrepancy between the applied-for secured amount and the amount stated in the primary agreement could lead to the application being questioned or rejected.

Conclusion

A Japanese ordinary mortgage offers a robust mechanism for securing a wide array of obligations, extending beyond simple monetary loans to encompass future claims, conditional claims, and even certain non-monetary claims. The critical factor for ensuring the mortgage's validity and its enforceability against third parties is the precise and legally compliant specification of the secured claim(s) in both the underlying agreements and the subsequent registration. Vague descriptions, or attempts to secure obligations through agreements that do not themselves establish a clear debt (such as a mere payment plan for an existing debt), may fail to create a perfectible security interest. For businesses, particularly those engaging in cross-border lending, a thorough understanding of these rules on defining the hi-tanpo saiken, coupled with expert legal and judicial scrivener advice, is essential to structuring effective and reliable mortgage security in Japan.