In Japanese real estate transactions, a "buy-back special agreement" (買戻特約 - kaimodoshi tokuyaku) allows a seller to reserve the right to repurchase the property from the buyer at a later date, under specified conditions. When such an agreement accompanies the sale of a condominium unit with integrated site-use rights (敷地権付き区分建物 - shikiken-tsuki kubun tatemono), specific registration procedures are crucial. This is not only to make the buy-back right enforceable against third parties but also to ensure compliance with the principle of inseparability (一体性の原則 - ittaisei no gensoku) that governs these integrated property interests in Japan.

This article details how both the transfer of ownership and the buy-back agreement for a shikiken-tsuki condominium are registered, ensuring the seller’s potential right of repurchase is legally secured.

Understanding the Buy-Back Special Agreement (買戻特約 - Kaimodoshi Tokuyaku)

The Japanese Civil Code (民法 - Minpō), in Articles 579 through 585, provides the legal framework for buy-back agreements. Key features include:

• Simultaneous Agreement: A buy-back special agreement must be entered into at the same time as the sales contract (Civil Code Art. 579). It cannot be validly created as an afterthought.
• Purpose: It grants the seller (vendor) the contractual right to unilaterally cancel the original sale and reacquire the property by returning the purchase price paid by the buyer, plus any contract expenses borne by the buyer, unless otherwise agreed (Civil Code Art. 583).
• Buy-Back Period (買戻期間 - kaimodoshi kikan): The period within which the seller can exercise this right cannot exceed ten years. If a longer period is stipulated, it is automatically reduced to ten years. If no period is specified, it is deemed to be five years (Civil Code Art. 580). Importantly, this period cannot be subsequently extended.
• Registration for Third-Party Effect: For the buy-back right to be enforceable against third parties (e.g., a subsequent purchaser from the initial buyer, or creditors of the initial buyer), the buy-back special agreement must be registered simultaneously with the registration of the sale (ownership transfer) (Civil Code Art. 581, Paragraph 1). This simultaneous registration is critical.

Application to Shikiken-tsuki Condominiums: Upholding Inseparability

When the property being sold is a shikiken-tsuki condominium unit, the principle of inseparability comes into play significantly:

1. Integrated Sale: Due to Article 22 of the Act on Unit Ownership of Buildings (区分所有法 - Condominium Ownership Act), the exclusive-use unit and its associated shikiken (integrated site-use right) must generally be sold as an indivisible package.
2. Integrated Buy-Back Agreement: Consequently, any buy-back special agreement made in conjunction with such a sale must also cover both the unit and its integrated shikiken as a single, unified object of the buy-back right. It is not permissible to create a buy-back right that applies only to the physical unit or only to the shikiken component if the property itself is registered as integrated.
3. Uniform Buy-Back Period: The buy-back period stipulated in the agreement must be identical for both the unit and the shikiken aspects, reflecting their unified legal status.

Registration Procedure: Securing the Buy-Back Right

To ensure the buy-back right is effective against third parties, the following registration steps are taken:

A. Simultaneous Application:
The application for the registration of the ownership transfer to the buyer and the application for the registration of the buy-back special agreement must be filed with the Legal Affairs Bureau (法務局 - Hōmukyoku) concurrently.

B. Nature of Buy-Back Registration: Supplementary Registration (付記登記 - Fuki Tōki):
The registration of the buy-back special agreement (kaimodoshi tokuyaku no tōki) is not an independent, standalone registration. Instead, it is made as a supplementary registration (付記登記 - fuki tōki) that is appended to, and dependent upon, the main ownership transfer registration in the Kō-ku (甲区 - ownership section) of the condominium unit's property register. Article 96 of the Real Property Registration Act specifically governs the registration of buy-back special agreements, stipulating that it is done by way of supplementary registration.

C. Effect on Shikiken via Unit Registration:
Consistent with the general principle of Real Property Registration Act Article 73, Paragraph 1 (whereby registrations on a shikiken-tsuki unit also affect the shikiken), the buy-back registration made as a supplementary matter to the unit's ownership transfer also extends its legal effect to the integrated shikiken. No separate buy-back registration entry is made in the land registry records for the shikiken component itself. The unit's register provides public notice for the entire integrated right.

D. Registering the Buy-Back Price and Contract Expenses:
The buy-back agreement must specify the price the seller needs to repay to exercise the right (typically the original purchase price) and any contract expenses paid by the buyer that are also to be reimbursed (Civil Code Art. 583). These financial terms are essential elements of the registered buy-back agreement.

• Challenge with Shikiken-tsuki Units: Since the registration is primarily made on the unit's record, a question arises as to how the portion of the buy-back price and expenses attributable to the shikiken (the land component) is adequately reflected.
• Solution for Comprehensive Recording: The buy-back registration on the unit's record must clearly state the total buy-back price and contract expenses, ensuring it is understood that these amounts cover both the unit and its integrated shikiken.
  • If the original sales contract (which forms the basis of the buy-back terms) itemizes the price for the unit and the shikiken component separately, these distinct amounts can be noted within the buy-back registration details.
  • More commonly, if a lump sum was paid for the integrated property and is therefore the basis for the buy-back price, this lump sum is registered. To clarify that this amount encompasses the land component (the shikiken), a specific notation is often used, such as: "Sale Price (for buy-back): ¥X, inclusive of site right pertaining to land parcel(s) [details of land parcel(s) constituting the shikiken]" (「売買代金 何番の土地と共に金何円」- baibai daikin nanban no tochi to tomo ni kin nan'en). This ensures that the full scope of the seller's repayment obligation (and thus the buyer's entitlement upon buy-back) is clear from the unit's register. It's noted in legal commentary that while this "inclusive of land" notation is accepted for buy-back prices, a similar method for recording combined lease rents over multiple parcels is not permitted.

Special Scenario: Buy-Back with Transferee's Ownership Preservation (RPRA Art. 74(2))

A unique situation arises when the first buyer of a new shikiken-tsuki condominium unit from a developer utilizes the streamlined ownership preservation registration process under RPRA Article 74, Paragraph 2 (the "heading-skipping" registration).

• If a buy-back special agreement was made simultaneously with the sale contract (which serves as the "cause of registration" for this specific type of preservation registration, as per RPRA Art. 76(1) proviso), the buy-back agreement can, and indeed must, be registered simultaneously with this Article 74(2) ownership preservation registration to be effective against third parties.
• In this case, the registration of the buy-back special agreement will be made as a supplementary matter (付記登記) to the buyer's ownership preservation registration itself. The logic is that since this particular type of preservation registration does have a transactional cause (the sale from the developer) and also effects the transfer of the shikiken, it can serve as the "main registration" to which the buy-back is appended. This practice is supported by longstanding administrative circulars (e.g., a Ministry of Justice Civil Affairs Bureau Director-General Circular dated August 29, 1963 (Shōwa 38.8.29 Minji San Dai 2540-gō), which allowed buy-back registration simultaneously with preservation registrations that have a transactional basis).

Exercising the Buy-Back Right and Subsequent Registrations

If the original seller (now the holder of the buy-back right) validly exercises this right within the registered period by tendering the stipulated buy-back price and contract expenses to the current owner (the initial buyer or their successor):

1. Re-acquisition of Ownership: Ownership of the shikiken-tsuki unit reverts to the original seller.
2. Registration of Re-acquisition: The original seller will then apply for an "Ownership Transfer Registration" (所有権移転登記) back into their name. The "Cause of Registration" (登記原因) for this will be "Exercise of Buy-Back Right, [Date of Exercise]" (年月日買戻権行使 - nen-gappi kaimodoshi-ken kōshi).
3. Cancellation of Buy-Back Registration: Upon the successful registration of ownership back to the original seller due to the exercise of the buy-back right, the original buy-back special agreement registration (and its supplementary notations) is no longer effective and would typically be cancelled (抹消 - masshō) from the register.

Transfer of the Buy-Back Right Itself

The seller's right to buy back the property, as a contractual right, can itself be an asset. Unless the original buy-back agreement restricts its assignability, the seller may be able to transfer or assign this buy-back right to a third party.

• Integrated Transfer Required: If such a transfer of the buy-back right occurs concerning a shikiken-tsuki condominium, the transfer must encompass the entire, integrated buy-back right that covers both the unit and its shikiken. A separate transfer of the right to buy back only the unit or only the shikiken would generally be inconsistent with the nature of the underlying integrated property.
• Registration of Transfer of Buy-Back Right: The registration of this transfer would be made as a supplementary registration to the existing buy-back special agreement registration (which is itself supplementary to the ownership registration) on the unit's property record. The application would require the Registration Identification Information (登記識別情報 - RII) of the current holder of the buy-back right (the assignor) as the registered obligor for this specific transfer.

Conclusion: Ensuring Enforceability of Conditional Repurchase

When selling a Japanese shikiken-tsuki condominium unit subject to a buy-back special agreement, adherence to the principle of inseparability is paramount: both the sale itself and the buy-back agreement must treat the unit and its integrated site-use right (shikiken) as a single, indivisible package.

To render the seller's buy-back right enforceable against any third parties who might subsequently acquire interests from the initial buyer, the buy-back special agreement must be registered simultaneously with the ownership transfer to the buyer. This registration takes the form of a supplementary entry (付記登記) appended to the main ownership transfer registration (or the first buyer's direct ownership preservation registration under RPRA Art. 74(2)) in the condominium unit's property register.

The details recorded, including the buy-back price and any contractual expenses, must clearly encompass both the physical unit and its associated shikiken, often employing specific notations if a single lump sum covers the integrated property. This meticulous registration approach ensures that the seller's conditional right to reacquire the entire shikiken-tsuki property is publicly recorded, legally protected, and can be asserted against the world.