Guarantor Companies Explained (How They Work)

Part 1: The Structure, Costs, Screening Process, and Types of Rent Guarantor Companies in Japan

If you plan to rent an apartment in Japan, you will almost certainly encounter one requirement:

A Guarantor Company.

For many foreigners, this system is confusing.
You may wonder:

• Why do I need to pay a company to guarantee my rent?
• Isn’t my income proof enough?
• What happens if I miss a payment?
• Is this like insurance?

This guide explains how guarantor companies work in Japan, in detail.

Chapter 1: What Is a Guarantor Company?

1. The Basic Definition

A guarantor company (家賃保証会社) is a private company that guarantees your rent payments to the landlord.

If you fail to pay rent:

The guarantor company pays the landlord first.
Then the company collects the money from you.

It protects the landlord — not the tenant.

2. Why Japan Uses This System

Japan traditionally required a personal co-signer (連帯保証人).

This was usually:

• A parent
• A close relative
• A financially stable Japanese resident

The co-signer would be legally responsible if the tenant failed to pay.

However:

• Fewer families live close together
• More foreigners rent property
• Landlords want faster risk management

As a result, guarantor companies became the standard.

Today, most rental contracts require one.

3. Why Foreigners Almost Always Need One

Landlords evaluate risk based on:

• Employment stability
• Visa duration
• Language ability
• Residency history

Foreign tenants are often considered higher risk due to:

• Potential visa expiration
• Leaving Japan suddenly
• Difficulty in legal collection overseas

Even high-income foreigners are typically required to use a guarantor company.

4. Who the Guarantor Company Protects

Important:

You are paying the fee.
But the protection is for the landlord.

This is not tenant insurance.

It is risk management for property owners.

Chapter 2: How the Business Model Works

Understanding the structure helps you avoid misconceptions.

1. The Core Structure

Step 1:
You apply for an apartment.

Step 2:
The landlord or management company requires a guarantor company.

Step 3:
You apply for screening.

Step 4:
If approved, you pay the guarantor fee.

Step 5:
If you fail to pay rent, the guarantor company pays the landlord.

Step 6:
They demand reimbursement from you.

2. What Is Typically Covered

Guarantee coverage usually includes:

• Monthly rent
• Maintenance/common fees
• Renewal fees
• Late payment penalties
• Restoration costs (in some contracts)

Coverage scope depends on the specific contract.

3. The Repayment Process After Default

If you miss payment:

• The landlord contacts you
• After a short delay, the guarantor company pays
• The guarantor company sends demand notice
• You must repay them directly

If unpaid:

They may escalate to:

• Collection agencies
• Legal action
• Court proceedings

4. Is This Insurance?

No.

Insurance spreads risk across many policyholders.

Guarantor companies:

• Immediately seek full reimbursement
• Do not absorb the loss long-term

You remain fully responsible.

Chapter 3: Fees and Cost Structure

This is one of the most misunderstood areas.

1. Initial Guarantee Fee

Usually:

50%–100% of one month’s rent.

Example:

Rent: ¥120,000
Initial guarantee fee: ¥60,000–¥120,000

Some companies set a minimum fee (e.g., ¥20,000).

2. Renewal Fees

Common patterns:

• Annual renewal fee (¥10,000–¥20,000)
• Monthly fee model (1%–2% of rent)
• Combination model

Always check the contract.

3. Is the Fee Refundable?

No.

Even if you:

• Never miss payment
• Move out early

The fee is non-refundable.

4. Why Fees Exist Even If You Never Default

Because the company assumes risk and conducts screening.

It is similar to a credit evaluation system.

You are paying for:

• Risk assessment
• Administrative handling
• Payment backup service

Chapter 4: Screening Criteria — How Approval Works

Guarantor companies evaluate risk quickly and systematically.

1. Income Requirements

General rule:

Monthly income should be at least 2–3 times the rent.

Example:

Rent: ¥100,000
Expected income: ¥200,000–¥300,000+

2. Employment Type

More stable:

• Full-time permanent employees

Moderate:

• Contract employees

Higher risk:

• Freelancers
• Newly employed workers

3. Visa Status

Long-term visas are preferred:

• Engineer/Humanities
• Permanent Resident
• Spouse Visa

Short-term visas increase rejection risk.

Student visas may require additional screening.

4. Students

Often require:

• Financial sponsor information
• Parent income proof
• Emergency contact

Even with part-time income, approval depends on overall stability.

5. Freelancers

More difficult.

Companies may request:

• Tax returns
• Bank statements
• Income history

Stable multi-year income helps.

6. Credit History

Some guarantor companies are linked to credit networks.

If you previously defaulted on rent:

Approval becomes difficult.

Internal databases may be shared among companies.

Chapter 5: Types of Guarantor Companies

Not all guarantor companies are the same.

1. Credit-Affiliated Companies (信販系)

Connected to major financial groups.

Characteristics:

• Stricter screening
• Credit score-based evaluation
• Stronger legal enforcement

Often used in higher-end properties.

2. Independent Guarantee Companies

More flexible.

Characteristics:

• Faster approval
• Sometimes higher fees
• May allow lower income applicants

Common in mid-range apartments.

3. Real Estate Company–Affiliated

Some management companies operate their own internal guarantor system.

Advantages:

• Simplified screening
• Streamlined process

Disadvantages:

• Less flexibility in negotiation

4. In-House Management Guarantees

Smaller landlords may use simplified guarantee arrangements.

Often combined with personal co-signer requirements.

Foreign Tenants, Legal Differences, Default Risks, Alternatives, and Strategic Advice

By now, you understand how guarantor companies function structurally.

In this section, we focus on real-life impact — especially for foreigners — and what happens when things go wrong.

Chapter 6: Foreign Tenants and Guarantor Companies

Foreign residents face unique screening challenges.

1. Language Ability

Some guarantor companies require:

• Basic Japanese communication ability
• Ability to respond to phone calls in Japanese

If you cannot communicate clearly:

Risk assessment increases.

Some companies may require:

• Japanese-speaking emergency contact
• Workplace confirmation

2. Visa Duration

Visa length matters significantly.

Long-term visas (3–5 years) signal stability.

Short-term visas (1 year or less) increase risk rating.

If your visa expires soon:

Approval becomes harder.

3. Emergency Contact Requirement

Even with a guarantor company, most contracts still require:

An emergency contact (緊急連絡先).

This person:

• Is not financially responsible
• Must reside in Japan (usually)
• Must be reachable

For foreigners without family in Japan, this can be difficult.

4. Risk of Leaving Japan

From a guarantor company’s perspective:

If a tenant leaves Japan without notice:

Debt recovery becomes extremely difficult.

This is why:

Foreign applicants may face stricter documentation review.

5. Working Holiday Visa Holders

Working holiday status is often considered:

High risk.

Short duration, unstable employment.

Approval depends heavily on:

• Income proof
• Japanese ability
• Property type

Chapter 7: Guarantor Company vs. Personal Co-Signer

Understanding the difference is important.

1. Legal Responsibility

Personal Co-Signer (連帯保証人):

• Fully legally liable
• Landlord can demand payment directly
• No need to contact tenant first

Guarantor Company:

• Pays landlord first
• Then collects from tenant
• Operates through formal process

2. Psychological Burden

Personal guarantors face:

• Emotional stress
• Family tension
• Relationship strain

Guarantor companies are:

Professional debt managers.

No emotional component.

3. Dual Requirement Cases

Some properties require:

Both guarantor company + personal co-signer.

This is common in:

• Luxury apartments
• High-rent properties
• Corporate housing

4. Why Landlords Prefer Companies

Companies offer:

• Faster recovery
• Standardized process
• Legal infrastructure
• Reduced personal conflict

Chapter 8: What Happens If You Miss Rent?

Many tenants underestimate this process.

1. Day 1–3: Payment Delay

You may receive:

• Reminder call
• Email
• SMS

Immediate communication can prevent escalation.

2. Around Day 7–14

If unpaid:

• Guarantor company pays landlord
• You now owe the guarantor company

This changes the relationship.

3. Formal Demand Notice

You may receive:

• Written demand letter
• Late fees added

Ignoring this is dangerous.

4. Continued Non-Payment

Possible outcomes:

• Contract termination
• Court filing
• Forced eviction

Eviction in Japan takes time, but it is legally possible.

5. Impact on Future Rentals

If you default:

• Internal databases may record your history
• Approval by other guarantor companies becomes difficult

There is no public “blacklist,”
but industry data sharing can occur.

Chapter 9: Alternatives to Using a Guarantor Company

In most cases, they are unavoidable.
But some exceptions exist.

1. UR Housing

UR (Urban Renaissance) properties:

• No guarantor required
• Instead, higher upfront deposit

However:

Income requirements are strict.

2. Company Housing (社宅)

Employer signs lease.

You may not need personal guarantor.

3. Corporate Contract

If your company rents the property directly:

Guarantor requirement may be waived.

4. Share Houses

Some share houses:

• Do not require guarantor
• Target foreign residents

But room quality varies.

5. Monthly Apartments

Short-term rentals often:

• No guarantor
• Higher monthly rent

Useful for initial stay.

Chapter 10: Real-Life Scenarios and Strategic Advice

Let’s examine different profiles.

Case 1: Full-Time Employee (3-Year Visa)

Strong approval probability.

Strategy:

• Prepare income certificate
• Provide stable emergency contact
• Choose property within income ratio

Case 2: International Student

Moderate difficulty.

Strategy:

• Show sponsor documents
• Choose student-friendly management companies
• Avoid high-rent properties

Case 3: Freelancer

Higher difficulty.

Strategy:

• Prepare tax returns
• Show stable income history
• Offer larger deposit if possible

Case 4: Newly Arrived Foreigner

Most difficult.

Strategy:

• Start with share house or monthly rental
• Build employment record
• Apply later for standard lease

Case 5: High-Income Short-Term Expat

Even high income does not eliminate requirement.

Strategy:

• Negotiate corporate lease
• Ask employer to co-sign