Understanding Guarantor and Guarantee Company Requirements for Rental Contracts in Sendai | How Screening Works and How to Choose

Understanding the Guarantee System Required for Rental Contracts

When renting a property in Sendai, almost all rental properties require either a guarantor or a guarantee company. While this is a safety measure for when rent payments fall behind, surprisingly few people fully understand the differences between the two options or their associated costs.

In recent years, the use of guarantee companies has become more common, with approximately 80% of rental properties in Sendai now requiring guarantee company coverage as a contract condition. The number of properties that only accept traditional guarantors continues to decline each year.

Differences Between Guarantors and Guarantee Companies

What is a Guarantor?

A guarantor is a person who assumes the same payment obligation as the tenant if the tenant fails to pay rent. Unlike a regular guarantor, a guarantor (under Japanese law) has no right to demand that the landlord first pursue the tenant for payment—if the landlord requests it directly, the guarantor must pay immediately.

The April 2020 revision to the Civil Code made it mandatory to set a maximum limit (guarantee amount) in guarantor contracts. Since this reform, the risks have become clearer, leading more people to be cautious about taking on guarantor responsibilities.

What is a Guarantee Company?

A guarantee company provides rent guarantee on behalf of the tenant. If the tenant falls behind on rent, the guarantee company pays the landlord directly and then pursues the tenant for repayment. This is particularly beneficial for people without family members available to serve as guarantors, including single people and foreigners, as it makes rental contracts possible without finding a guarantor.

Guarantee Company Screening Criteria and Passing Tips

Guarantee company screenings typically focus on the following criteria:

Income and Rent Balance

The general rule of thumb is that monthly rent should be no more than one-third of monthly income. Since the average rent for a 1LDK apartment in Sendai is around ¥60,000-¥70,000, monthly income of at least ¥180,000 is a guideline. On an annual basis, having at least 36 times the monthly rent in annual income makes approval more likely.

Employment Status and Company

Regular employees generally pass screening smoothly, but for contract or part-time workers, your length of employment and income stability become more important. If you've recently changed jobs, it helps to have your previous employer's tax withholding certificate and your current employment contract ready.

Credit Information Verification

Credit-based guarantee companies (such as Orico and JCS) check credit card and loan payment histories. If you have a history of late payments, screening becomes stricter. In such cases, it's wise to look for properties that accept independent guarantee companies (such as Japan Safety, Casa, and 4C), which use their own screening criteria and may be more lenient with those who have credit concerns.

Typical Guarantee Company Costs in Sendai

The costs for guarantee companies in Sendai's rental market are typically as follows:

If you want to reduce initial move-in costs, the monthly fee option will ease your burden upfront, though the total cost may be higher for long-term tenancy. Compare options based on your expected length of stay.

What to Do If You Fail Screening

If you don't pass a guarantee company's screening, there are still options:

Types of Guarantee Companies and Their Characteristics

Guarantee companies are broadly divided into three types based on their screening methods. Understanding each type will help you find the right fit:

Credit-Based Guarantee Companies

These are affiliated with credit card companies like Orico Forent Insure, JCS, and Epos. They review credit information from CIC (Credit Information Center) and tend to be stricter with applicants who have a history of late payments. However, they typically offer faster approvals, often responding the same day.

Independent Guarantee Companies

These include Japan Safety, 4C, and Casa—companies not affiliated with credit information bureaus. Since they use their own screening criteria, people who failed credit-based screening may still get approved. Many properties in Sendai's rental market work with independent guarantee companies.

LICC-Affiliated Guarantee Companies

These are members of the National Rental Guarantee Association (LICC), which shares information about rent defaults among member companies. If you have a history of default with another LICC member, it may affect your screening, though credit card usage history is not considered.

Summary | Understand the Guarantee System for a Smooth Rental Contract

The guarantee system in rental contracts is an important mechanism that protects both tenants and landlords. When searching for properties in Sendai, confirm the guarantee company type and fees in advance and choose a guarantee plan that works for you. This will lead to a smoother contract process.

Q. Can foreigners pass guarantee company screening?

Yes, foreigners can use guarantee companies. You'll need documents such as a residence card, passport, and employment certificate. We recommend choosing a real estate agency that works with guarantee companies experienced in handling foreign applicants.

Q. Are there properties that require both a guarantee company and a traditional guarantor?

Yes, some properties require both guarantee company coverage and a personal guarantor. Conditions vary by property, so it's wise to confirm this with the real estate agent before applying.