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It has been controversial on the question of who the lessor is if an immovable property which has been lent to the lessee is transferred by the lessor (transferor) to the transferee. The case law in Japan recognizes the principle that the transferee shall become the lessor even though the lessee has not agreed to it, provided that any special circumstances do not exist which prevent the transfer of the status of the lessor. The Interim Proposal for the Revision of the Civil Code (the Law of Obligation) provides that the status of the lessor shall transfer to the tranferee in principle. However, as an exception, it also recognizes that an agreement between the lessor (transferor) and the transferee that the transferor withholds the status of the lessor is valid provided that the transferee lends the property to the transferor and that the status of lessor shall transfer to the transferee or its successor (s) when the lease between the transferee and the transferor ends for any reasons. This means that the status of the lessor may be transferred to the transferee or withheld under the transferor only by the agreement between the transferor and the transferee without checking the existence of special circumstances in individual case as recognized by the case law. But, it would aff ect the balance of interests between the lessor (transferor), the transferee and the lessee in each case and prevent the maximization of the utility among those stakeholders. In this context, the Civil Code should be amended on the basis of the case law by articulating the principle and making the proviso more fl exible which recognizes the special circumstances which prevent the transfer of the status of the lessor such as those which do not aff ect the lessee’s interest.

On the Validity of An Agreement between the Transferor and the Transferee of the Leased Immovable Property to Withhold the Status of the Lessor