How is Co-owned Inherited Property Managed in Japan Before It's Formally Divided Among Heirs?

Japanese Attorney at Law - Bengoshi L.L.

27 May 2025 • 10 min read

Upon the death of an individual in Japan, if there are multiple heirs, the inherited property does not automatically devolve to them in neatly separated portions. Instead, under Article 898 of the Japanese Civil Code, the entire estate becomes the co-owned property of all the heirs. This state of co-ownership, known as isan kyōyū (遺産共有 - co-ownership of inherited property), persists until a formal division of the estate, or isan bunkatsu (遺産分割), is completed. Managing this undivided estate during the interim period—which can sometimes be lengthy—presents a unique set of legal and practical challenges for the co-heirs. This article explores the legal framework governing the management of co-owned inherited property in Japan prior to its formal division.

The Nature of Co-ownership of Inherited Property (Isan Kyōyū)

The foundational principle is straightforward: when two or more individuals inherit property, they become co-owners. The prevailing legal view in Japan, supported by long-standing case law, is that isan kyōyū is a form of "ordinary co-ownership" (tsūjō no kyōyū), governed primarily by the general provisions for co-ownership found in Articles 249 et seq. of the Civil Code. This contrasts with more restrictive forms of joint ownership found in other legal traditions, such as "collective ownership" (gōyū), where individual shares are less distinct and individual rights to dispose of one's interest are more limited.

Despite its classification as ordinary co-ownership, isan kyōyū possesses a distinct characteristic: it is inherently temporary and aimed at eventual division among the heirs. This teleological aspect—that the co-ownership is a transitional phase leading to isan bunkatsu—can influence the interpretation and application of general co-ownership rules in the context of an undivided estate.

Each co-heir holds an undivided interest or share (mochibun - 持分) in the entirety of the inherited property. This share typically corresponds to their statutory inheritance proportion (sōzoku-bun - 相続分), unless otherwise specified by a valid will. It's crucial to understand that this co-ownership applies to the estate as a whole; specific assets within the estate are not automatically assigned to individual heirs until the formal isan bunkatsu process is completed, or unless a will directs a specific testamentary division or makes particular bequests.

Guiding Principles for Managing the Undivided Estate

One of the notable features of Japanese inheritance law is the absence of a dedicated, comprehensive chapter within the Civil Code specifically detailing the day-to-day management of an undivided inherited estate during the isan kyōyū period. While there are provisions for specific scenarios (such as when an heir's status is contested, during the period for accepting or renouncing inheritance, or when an administrator is appointed for an absentee's property or in cases of estate bankruptcy), a general regime for routine management by co-heirs themselves is largely derived from the application of the ordinary co-ownership rules.

Authority of Co-heirs: A Spectrum of Management Actions

The authority of co-heirs to deal with the undivided estate varies depending on the nature of the action being undertaken. These actions are generally categorized as acts of preservation, administration (or management), and change (or disposition).

A. Acts of Preservation (Hozon Kōi - 保存行為)

Acts of preservation are those necessary to maintain the physical integrity or economic value of the inherited property and to prevent its loss, damage, or deterioration.

Authority: Under Article 252, proviso, of the Civil Code (applicable to co-ownership generally), any single co-heir can independently perform acts of preservation without needing the consent of the other co-heirs. This allows for prompt action to protect the estate.
Examples of Preservation Acts Include:
- Undertaking necessary repairs to inherited buildings or other structures.
- Taking legal action against third parties unlawfully occupying or interfering with estate property (e.g., demanding their removal).
- Taking steps to interrupt the statute of limitations for claims held by the estate (e.g., making a formal demand for payment on a debt owed to the deceased).
- Applying for the registration of inheritance (sōzoku tōki) in the names of all co-heirs to reflect their co-ownership status on public property registers.
- Filing a lawsuit to cancel a fraudulent registration made by a third party over an estate asset. The Supreme Court has affirmed that a co-owner can individually pursue such an action as an act of preservation (Decisions of May 10, 1956, and July 11, 2003).

B. Acts of Administration or Management (Kanri Kōi - 管理行為)

Acts of administration involve utilizing, improving, or managing the co-owned property in its ordinary course, typically without fundamentally altering its nature or disposing of it.

Authority: Decisions regarding acts of administration require a majority vote of the co-heirs. This majority is determined not by the number of heirs, but by the cumulative value of their respective shares in the estate (Civil Code Article 252, main text).
Examples of Administrative Acts Include:
- Leasing out inherited real estate for short terms, generally understood as those terms not exceeding the limits set in Civil Code Article 602 (e.g., ten years for land, three years for buildings).
- Collecting rent and other income generated by estate properties.
- Undertaking improvement works that enhance the property's utility or value without changing its fundamental character (e.g., minor renovations or upgrades).
- Terminating existing contracts related to the estate property, such as leases. While the decision to terminate requires majority consent, some legal commentators suggest that once the decision is made, the formal notice of termination might be given by one co-heir on behalf of the majority.

C. Acts of Change or Disposition (Henkō Kōi - 変更行為 / Shobun Kōi - 処分行為)

Acts of change or disposition are those that fundamentally alter the physical nature of the property or involve its sale, encumbrance, or other forms of alienation.

Authority: Such significant actions require the unanimous consent of all co-heirs (Civil Code Article 251). This high threshold reflects the serious impact these acts have on the property rights of each co-owner.
Examples of Dispositive Acts Include:
- Selling inherited real estate, valuable movables, or other significant assets of the estate.
- Establishing a mortgage or other security interest over inherited property.
- Demolishing an inherited building or fundamentally changing the designated use of land.
- Opening a safe deposit box held in the deceased's name is often treated by financial institutions as requiring the presence or consent of all heirs, effectively categorizing it as an act requiring unanimity, given its potential connection to asset disposition.
Disposition of an Individual Co-heir's Share: It is important to distinguish the disposition of the entire estate asset from the disposition of an individual co-heir's undivided share (mochibun) in the estate. A co-heir is generally free to sell, mortgage, or otherwise dispose of their own undivided share without the consent of other co-heirs (Supreme Court, November 7, 1975). However, the purchaser of such a share simply steps into the shoes of the selling co-heir, becoming a co-owner of the undivided estate with the remaining heirs, and does not acquire title to any specific asset.
Attempted Disposition of Entire Asset by One Co-heir: If one co-heir, without the consent of others, purports to sell or transfer an entire specific asset belonging to the estate (not just their own share), that transaction is ineffective with respect to the shares of the non-consenting co-heirs. The non-consenting co-heirs can assert their ownership rights against the third-party purchaser, even if the purchaser was unaware of the lack of full authority (Supreme Court, February 22, 1963).

Special Scenarios and Appointed Management

Beyond the general rules for co-heir management, Japanese law provides for more structured management, often involving court intervention, in specific circumstances:

A. During the "Deliberation Period" for Acceptance or Renunciation

Heirs are granted a "deliberation period" (jukuryo kikan), typically three months from the time they become aware of the inheritance, to decide whether to simply accept the inheritance (including all assets and debts), renounce it entirely, or make a qualified acceptance (limiting liability for debts to the extent of inherited assets) (Civil Code Article 915).

During this period, heirs who have not yet made their decision are obligated to manage the estate property with the same degree of care they would apply to their own property (Civil Code Article 918, Paragraph 1).
Their powers are generally restricted to acts of preservation and routine management. Engaging in acts of disposition or significant alteration of the estate during this period can be construed as an implied simple acceptance of the inheritance, with full liability for debts (Civil Code Article 921, Item 1).
If the management by heirs is inadequate or if the estate is at risk, the Family Court can, upon petition by an interested party or a public prosecutor, appoint a property manager or order other necessary preservation measures (Civil Code Article 918, Paragraph 2). The powers of such a manager are typically based on those of a manager for an absentee's property.

B. When an Heir's Entitlement is Disputed

If there is a legal dispute concerning an individual's status as an heir (e.g., proceedings for disinheritance by the deceased, or legal actions challenging parentage which would affect heirship), the Family Court can also order measures for the management of the estate to prevent mismanagement or dissipation while the heir's status is being determined (Civil Code Article 895). This often involves appointing an estate administrator whose powers are analogous to those of a manager for an absentee's property, focusing on preservation and necessary administration until the rightful heirs are definitively established.

C. Management by Agreement Among Co-heirs

Co-heirs are free to mutually agree on how the undivided estate will be managed pending formal division. They can designate one or more among themselves, or even a third party (such as a trusted professional), to act as the manager(s) of the estate. Such an arrangement is essentially based on a mandate (inin) or a similar contractual agreement among the co-heirs, and the appointed manager's powers and duties will be governed by that agreement and general principles of agency. For practical purposes, financial institutions dealing with an estate often request that the co-heirs formally designate a single representative heir to conduct transactions.

D. Management During Formal Estate Division Proceedings

If co-heirs cannot agree on the division of the estate and one or more of them file a petition for estate division mediation (isan bunkatsu chōtei) or adjudication (isan bunkatsu shimpan) with the Family Court, the court has the authority to take interim measures (hozen shobun) for the property's administration if deemed necessary. This can include appointing a "property manager" for the estate or issuing specific instructions to the parties regarding its management (Article 200, Paragraph 1 of the Act on Adjudication of Domestic Relations Cases).

The powers of a manager appointed under these circumstances are typically modeled on those of a manager for an absentee's property, including the duty to act with the care of a good manager and the need to seek court permission for acts exceeding ordinary administration.
The appointment of such a manager does not automatically strip the co-heirs of all their underlying co-ownership rights or management powers. However, it does mean that the co-heirs must tolerate the manager's legitimate actions and cannot undertake management activities that conflict with the manager's court-authorized mandate.

Treatment of Income and Substitute Assets from the Estate

Complications can arise concerning assets or income derived from the original inherited property during the isan kyōyū period:

Income (e.g., Rental Income): A significant Supreme Court decision (September 8, 2005) established that monetary claims, such as rental income, accruing from inherited property after the commencement of inheritance but before the estate is formally divided, are generally considered to be assets separate from the original inherited estate itself. According to this precedent, such income is deemed to be automatically divided among the co-heirs in proportion to their respective inheritance shares at the time it accrues, and its ownership is not affected by the subsequent estate division agreement or court order. This can create practical complexities, for example, if these funds are needed to pay for ongoing estate expenses or debts before the final division.
Substitute Assets (e.g., Sale Proceeds, Insurance Payouts): If an asset belonging to the undivided estate is sold by the unanimous consent of all co-heirs before the formal estate division, the monetary proceeds from that sale are generally treated as divisible monetary claims held by the co-heirs according to their shares (Supreme Court, September 19, 1977). Similarly, if an estate asset is destroyed and an insurance payout is received, or if compensation is paid for damage to an estate asset, these funds may also be considered directly divisible. If one co-heir unilaterally consumes or wrongfully disposes of an estate asset, they become personally liable in damages to the other co-heirs, but this claim for damages is typically considered a separate monetary claim rather than an item for inclusion in the isan bunkatsu itself.

The Overarching Goal: Timely and Fair Estate Division

The legal framework for managing co-owned inherited property, while providing mechanisms for preservation and some level of administration, inherently points towards the necessity of a formal estate division (isan bunkatsu) as the ultimate resolution. The interim period of isan kyōyū is fraught with potential challenges:

Disagreements: Co-heirs often have differing views on how to use, manage, or eventually divide the assets. Simple majority rule for administrative acts can leave minority-share heirs feeling marginalized.
Risk of Neglect: Particularly for assets requiring active management (e.g., a business, a rental property portfolio, or even a vacant house requiring upkeep), if no co-heir takes clear responsibility or if disagreements prevent concerted action, the assets can deteriorate, lose value, or incur unnecessary liabilities (like unpaid property taxes or penalties).
Restrictions on Individual Benefit: Co-ownership restricts individual heirs from freely using specific assets as if they were their sole property or from independently disposing of them to realize their individual share's value until a formal division is made.

Given these inherent difficulties, Japanese law strongly encourages co-heirs to reach an amicable agreement on the division of the estate. If they cannot agree, any co-heir has the right to petition the Family Court to mediate the dispute or, if mediation fails, to adjudicate the division. The court will then determine how the estate should be divided, considering the nature of the assets, the wishes of the parties, and principles of fairness.

The management of co-owned inherited property in Japan during the period before its formal division is governed primarily by the general rules of co-ownership found in the Civil Code, with specific inheritance-related provisions applying in certain circumstances. Co-heirs possess varying degrees of authority depending on whether an action constitutes preservation, routine administration, or a more fundamental change or disposition of an estate asset. Unanimous consent is typically required for the most significant actions, while individual heirs can act alone for preservation, and majority rule (by share value) applies to ordinary management.

While this framework allows for a degree of ongoing management during the isan kyōyū phase, the potential for disputes among co-heirs, the risk of asset neglect or mismanagement, and the inherent limitations on individual heirs' ability to fully utilize or realize the value of their inheritance underscore the critical importance of moving towards a formal and conclusive estate division (isan bunkatsu) in a timely manner. The Civil Code's relative lack of a dedicated, comprehensive chapter on the specific management of undivided estates means that navigating this area often requires a careful application of general legal principles to what can be fact-specific and sometimes intricate family and property situations. The overarching goal of the law is to facilitate an orderly transition of the deceased's property to their rightful successors, with the period of co-ownership serving as an interim stage toward that final distribution.