What is rights adjustment?
To better understand Sansei Landic’s business, consider a relationship between a cup and a saucer. While a cup alone is useful and so is a saucer, the value maximizes if they are used together as one. Our business offers higher value by combining cups (land lease right) and saucers (leasehold land) that are separately used.
Rights adjustment for leasehold land
What is leasehold land?
With respect to a piece of real estate for which the right to use the land (land lease right) and the right to own the land (land ownership right) are under separate terms, the right to own the land belongs to the owner of the leasehold land offered to the lessee. Multiple rights existing on one piece of property can deprive the freedom of both the lessor (landowner) and the lessee (land lease right holder), causing each party to render asset devaluation.
Such properties exist due to the traditional practices and laws (under the former Act on Land and Building Leases) relating to the leasing of land and buildings in Japan. Many of these properties originated before 1980 and are characterized by the rights of the lessee being better protected than land owners compared to other countries with similar laws. Today, more than one million households in the country are
land lease right holders, and the market is significant and diverse.
Landowners (lessors) feel the need to sell since land would not be returned
semi-permanently anyway and the revenue generated remains low. Meanwhile, land lease right holders (lessees) have the desire to own the leased land. However, due to various human relationship factors; discontent; and / or a lack of
understanding over many years, it has been difficult to close sales and purchase deals or resolve issues between the parties.
Sansei Landic acquires the leasehold land and merges all the separate rights into one in order to recover the devalued real estate which otherwise can generate higher revenue.
Assume the case illustrated in Ref. Figure 3 (Rights adjustment for leasehold land). Sansei Landic first purchases the leasehold land “as is” from the landowner and becomes the landlord. Under the law in Japan, the condition is such that unless a piece of land is in contact ～for 2 meters～ with a road which is no less than 4 meters wide, no new building can be built on the land. In Ref. Figure 3, ○ (yes) or × (no) signifies the possibility of reconstruction of a building at the time when the land is purchased by the Company. At the time of purchase, reconstruction is not possible for half of the pieces of land.
First, Sansei Landic conducts measurements and holds meetings with the local authorities to extend the road. By this, two households have become eligible for reconstruction (rights adjustment (1)).
Next, we negotiate with the right holders and short-plat the land into lots so that every lot is in contact with the road (rights adjustment (2)).
After the value of the entire piece of land is increased, Sansei Landic sells the leasehold land to land lease right holders. If holders want to sell their land lease rights, we purchase the land lease rights and combine them to restore the essential value of the real estate piece.
A period of about a year is required to complete the rights adjustments and for resale. Normally, 80% are sold to land lease right holders, and the Company acquires the remaining land lease rights for resale to third parties including other real estate companies. In some cases, we retain the right and collect rent, and sell the land in the medium-to-long term.
Ref. Figure 3
(Rights adjustment for leasehold land)
- Location: City A in Kanagawa Prefecture
- Area: 1,000 ㎡
- Number of land lease right holders: 12
- At the time of purchase
by SANSEI LANDIC
- Of the 12 lots of leased land, the six that are not in contact with the road are not eligible for reconstruction ( low value as a property)
SANSEI LANDIC purchases the leasehold land as is from the landowner
- Rights adjustment (1)
- After conducting detailed measurements, discuss with the local authorities and extend the road within the site.Two out of six units become eligible for reconstruction
- Rights adjustment (2)
- As a result of subdivision, all lots come into contact with the road and all 12 units become eligible for reconstruction.(Significantly increases the value of the property)
A business model that allows SANSEI LANDICʼs profit-generating opportunity to provide the landowner as well as the land lease right holder with added value, resulting in establishing a win-win-win relationship among the three parties.
Purchasing properties with existing residence
This is the process of purchasing an occupied apartment building, performing rights adjustments and reviving its value.
A new building with the potential to generate high income attracts many investors. Sansei Landic acquires old buildings with a number of vacant units and low rent. They attract a limited number of buyers.
After purchasing the property, Sansei Landic negotiates with residents (housing lease right holders) to have them move out to other locations by paying moving expenses. Once the housing units are all and have been transferred to Sansei Landic, we demolish the buildings to secure a vacant lot for sale to a construction company or another third party.
By taking a piece of real estate which initially unable to be used effectively because it was still occupied despite having a low occupancy rate due to deterioration of the property, which in turn was caused by a lack of adequate maintenance work, Sansei Landic performs rights adjustments to put the property into a condition which allows it to be used effectively, thereby heightening the value of the property.
As in the case with leasehold land, it takes about one year to complete the rights adjustments for resale. For many of the housing lease right holders who are able to relocate from the old housing to another location offering better housing environment with moving expenses paid by Sansei Landic, it is rare that we face difficulties in receiving the transfer of property.
Ref. Figure 4 (Rights adjustment for existing residence)
A business model that allows SANSEI LANDICʼs negotiating skills to benefit both the land and building owner and the housing lease right holder, resulting in establishing a win-win-win relationship among the three parties.