Commercial Security Deposits and 'Shikibiki' Rules in Tokyo

The framework governing deposits in Tokyo’s commercial real estate market (prime offices, retail spaces, warehouses) operates in a completely different universe than residential consumer protection guidelines. Concepts like "the landlord pays for wear and tear" are virtually ignored in B2B transactions. Instead, "Freedom of Contract" dictates an environment of astronomically high deposits and legally ironclad non-refundable clauses.

Disclaimer: This guide provides general legal information for educational purposes only and does not constitute legal advice. Handling multi-million dollar commercial deposits involves massive legal and severe corporate tax implications. Always consult a Japanese attorney and certified public accountant (Zeirishi). Last verified: March 2026.

The Reality of Massive "Deposits" (Hoshokin / Shikikin)

In commercial real estate, particularly in Tokyo’s Grade-A office towers or large retail facilities, the upfront money paid by a tenant is often called a "Guarantee Deposit" (Hoshokin) rather than a standard security deposit (Shikikin), though legally, they function identically under Article 622-2 of the Civil Code.

Standard Deposit Limits in the Tokyo Market:

• Small to Mid-Sized Offices / Street-Level Retail: 3 to 6 months' rent.
• Grade S/A Mega-Offices / Large Retail Facilities: 6 to 12 months' rent (or even higher depending on the corporate tenant's credit rating/financial health).

Why Are They So Astronomically High?

1. Total Defense Against Bankruptcy: If a publicly traded company goes bankrupt, evicting them and legally taking back the property can take 6 to 12 months. Landlords demand a massive cash pool to completely guarantee their rental income during the lengthy court eviction process.
2. Collateral for Demolition (Skeleton Return): Commercial interior build-outs (heavy HVAC ducting, server rooms, commercial kitchens) are incredibly expensive to demolish. If a tenant "skips town," the landlord will be stuck with a tens-of-millions-of-yen demolition bill. The massive deposit acts as an insurance policy that the landlord will never pay for a tenant’s demolition out of pocket.

The Legality of the "Amortization" Clause (Shikibiki / Shokyaku)

Perhaps the most potent weapon in a Tokyo commercial landlord's arsenal is the "Amortization" (Shikyaku or Shikibiki) clause. This practice is universally adopted across B2B contracts.

This is a Special Clause stating that upon move-out, a set percentage (e.g., 20%) or a set amount (e.g., "2 months' rent") of the massive deposit is unconditionally confiscated by the landlord and will not be refunded, regardless of how beautifully the tenant maintained the property.

Example: A tech company places a 10,000,000 JPY deposit on an office. The lease includes a "20% Amortization upon Cancellation." Even if the company cleans perfectly, the landlord automatically pockets 2,000,000 JPY in pure, non-refundable profit (similar to Key Money). The remaining 8,000,000 JPY is then used to pay for the required demolition costs, and whatever is left is finally refunded.

Legal Status: If a landlord attempted "Shikibiki" in a residential contract, a Tokyo court would immediately strike it down as an unfair consumer practice. However, the Japanese Supreme Court has explicitly ruled that in a B2B commercial lease where both parties are sophisticated corporations, moderate Shikibiki is perfectly legal and does not violate public policy.

The Burden of the "Skeleton Return" (Sukeruton Modoshi)

In commercial spaces, "Restoration to Original Condition" does not mean sweeping the floor and wiping the counters. It means returning the property to the wilderness.

Almost all commercial contracts mandate a "Skeleton Return" (Sukeruton Modoshi). When the lease inevitably ends, the tenant is legally required—at their own astronomical expense—to completely destroy and remove the interior.

1. All lighting fixtures, raised access floors (OA floors), ceiling tiles, partitions, installed heavy AC units, and networking cables.
2. The site must be completely stripped bare to the raw, exposed concrete building core and structural pipes.

The Tyranny of the "Landlord-Designated Contractor" (B-Kouji)

Naturally, a departing tenant wants to hire the cheapest demolition crew they can find. However, in Tokyo’s high-rise offices and malls, the lease contract strictly prohibits this.

The landlord legally binds the tenant to use the "Landlord's Designated Contractor" (the B-Kouji system) to perform the Skeleton demolition. The stated reason is to protect the structural integrity of the entire skyscraper—preventing a cheap contractor from accidentally severing the building's fiber optics or central sprinkler system. Because the designated mega-construction firm essentially holds a monopoly on the job, the demolition quotes provided to the poor tenant are notoriously exorbitant (often 3x to 5x market rate).

The tenant has no choice but to pay. If they refuse, the landlord simply deducts the multi-million yen demolition invoice directly from the tenant's massive Security Deposit and bills them for the difference.

The "Inuki" Exception (Fixture Transfer)

To avoid these horrific demolition costs, a departing tenant (like a café) might try to sell their interior build-out and kitchen equipment directly to the next incoming tenant. This is known as an "Inuki" (turnkey/furnished) transfer.

However, commercial leases strictly include a clause waving the tenant's "Right to Request Purchase of Fixtures" (Article 33 of the Act on Land and Building Leases). The tenant cannot force the landlord to buy their interior. An Inuki transfer is impossible unless the landlord explicitly grans written permission as a special favor to the departing tenant.

Landager’s B2B Commercial Engine automatically tracks gigantic corporate security deposit ledger balances over decades. Upon termination, it programmatically calculates the precise "Shikyaku/Shikibiki" deduction percentages, seamlessly integrates B-Kouji demolition invoices, and algorithmically generates the final, highly complex B2B liquidation statement for corporate accounting departments.

Return to Tokyo Commercial Overview.