Laws and Regulations to Check Before Converting a Minpaku Property into a Rental

Fluctuating inbound demand, the emergence of new competitors, and the daily hassle of operations… While minpaku management may look glamorous, its inherent instability has led an increasing number of owners to consider converting their properties to “standard rental housing” in search of more stable income.

However, this business conversion is not as simple as merely stopping bookings on reservation sites and contacting a real estate agency.

Let us share the conclusion of this article upfront.

The key to a smooth transition from minpaku to rental lies in properly understanding, in advance, the laws surrounding “lease agreements”—which are entirely different from the temporary usage contracts made with travelers—as well as the regulations concerning the “restoration to original condition” of equipment installed for minpaku operations.

In this article, to help you avoid future regrets, we thoroughly explain the essential laws and regulations you must check before listing your minpaku property as a rental, focusing on four specific key points.

Why Is Converting from “Minpaku” to “Rental” Becoming an Option Now?

The motivations behind considering a business conversion typically include the following:

• Stabilizing income: Compared to minpaku, which is heavily influenced by fluctuations in tourism demand, rental management provides a fixed monthly rental income, making revenue forecasting easier and more stable.
• Reducing operational burden: You are freed from the complex tasks of round-the-clock response to unfamiliar guests, daily cleaning arrangements, and managing OTA listings.
• Avoiding regulatory change risk: You can avoid the risk of operations suddenly becoming difficult due to external factors, such as municipalities tightening their ordinances.

While these benefits are highly attractive, proceeding with a conversion without understanding the legal responsibilities and constraints behind them is extremely risky.

[Conversion Manual] Four Key Points on Laws and Regulations to Check

Point 1: [Contract Law] Understanding the Barrier of the “Act on Land and Building Leases”

This represents the most fundamental difference between minpaku and rental housing.

• Minpaku: The contract with a guest is essentially a temporary “facility usage agreement.” Once the period ends, the guest checks out.
• Rental: The contract with a tenant is governed by the **”Act on Land and Building Leases,”** a law under which the tenant’s right to occupancy is very strongly protected.

You Cannot Easily Evict a Tenant

Once you lease a room under a “standard lease agreement,” you cannot unilaterally terminate the contract or refuse to renew it for the owner’s (landlord’s) convenience—unless there is a clear breach of contract, such as non-payment of rent—without justifiable cause. The bar for what counts as “justifiable cause” is extremely high, and reasons such as “I want to use it myself” or “I want to rent it out at a higher price” will generally not be accepted.

Converting Back to Minpaku Later Is Extremely Difficult

In other words, the casual notion of “let’s rent it out for a few years for now, and switch back to minpaku once inbound demand picks up again” simply does not hold up. Once you lease the property, it will remain a rental property until that tenant moves out. You must first come to terms with this irreversibility.

• The “fixed-term lease agreement” as a countermeasure: There is also an option called a “fixed-term lease agreement,” under which the contract definitively ends upon expiration of the lease period without renewal. This makes it easier to plan ahead if you want to use the property for a different purpose in the future, but you should also understand the drawback that, generally speaking, it is harder to find tenants compared to a standard lease agreement.

Point 2: [Property Regulations] The Obligation and Scope of “Restoration to Original Condition”

For your minpaku operation, you likely added or modified various equipment in the facility. This raises the question of how to handle it going forward.

• Handling fire safety equipment: Automatic fire alarm systems, exit guide lights, and emergency lighting fixtures installed to obtain minpaku permits are typically overkill for standard rental housing. You need to decide in advance whether to remove them or keep them as value-added features. Removal naturally incurs costs. If you keep them, you should clearly specify in the lease agreement who is responsible for their maintenance.
• Minpaku-specific interiors: Partitions altered to accommodate multiple beds, or uniquely designed wallpaper, may not suit the needs of typical residents. In many cases, “restoration” construction work is necessary to return the space to a condition more suitable for renting out as a general residence.

Point 3: [Advertising Regulations] Compliance with the “Building Lots and Buildings Transaction Business Act”

Legal considerations also come into play when advertising for tenants.

• Risks of self-advertising: While it is possible for owners themselves to advertise for tenants via social media or flyers, the wording used in such advertisements is regulated under the “Building Lots and Buildings Transaction Business Act.” There are various rules, such as the prohibition of “bait advertising”—luring in prospects with favorable terms that don’t actually exist—and violations are subject to penalties.
• Working with a real estate agency is standard practice: To avoid trouble and reach a wide pool of prospective tenants, the safest and most reliable approach is to work with a specialized real estate agency. In such cases, you will generally pay a brokerage fee equivalent to about one month’s rent as a success fee.

Point 4: [Administrative Procedures] Don’t Forget to File a “Notice of Discontinuation” for Minpaku

If you are fully discontinuing your minpaku business, you are legally required to notify the relevant government authority.

• Notification obligation: If a facility that was operated under the Private Lodging Business Act (the “minpaku law”) or the Hotel Business Act is no longer used as a minpaku, you must submit a **”Notice of Discontinuation”** to the relevant administrative body, such as the local public health center.
• Risks of neglecting this: If you fail to file this notice, you will continue to be regarded as operating the business, remaining subject to periodic reporting obligations and potential on-site inspections by the authorities. Once you’ve decided to convert your business, be sure to complete this procedure promptly.

Practical Advice for a Successful Rental Conversion

• Switching insurance policies: The facility liability insurance you carried during minpaku operations does not cover rental business. Be sure to switch to fire insurance designed for rental housing, or to “landlord liability insurance,” which covers a landlord’s liability.
• Using a rent guarantee company: This has now become an essential risk-management measure in rental property management. By making enrollment with a rent guarantee company a condition of tenancy, you can protect yourself against the risk of unpaid rent.
• Redefining your target demographic: Your previous customers were “travelers,” but your future customers will be “residents.” You need to clearly define what kind of tenants you want to attract (single professionals, students, couples, families, etc.) and then optimize the interior style, as well as the rent and terms you advertise, accordingly.

Conclusion: A Hasty Conversion Is Risky. Achieve Smart Asset Management Through Proper Knowledge

Converting from minpaku to rental is not simply a change in operational policy. It is a major management decision that fundamentally shifts the “investment strategy” of your real estate asset—from a short-term, high-risk, high-return model to a long-term, stable-income model.

Fully understanding this irreversibility, and acquiring accurate knowledge of the laws and regulations unique to rental management—starting with the Act on Land and Building Leases—is the only path to protecting and growing your valuable asset over the long term, without being swayed by short-term shifts in circumstances.

Is Now Really the Best Time for That “Business Conversion”?

“Given my current income situation, I wonder which would be more profitable—continuing with minpaku or switching to rental…”

“The laws are complicated, and I’m anxious about making this decision on my own.”

“Even if I do convert, I don’t know who to consult.”

Bring these concerns to us.

We at Stay Buddy Inc. are professionals in minpaku operations, and at the same time, your **”asset management partner”** dedicated to maximizing the value of your real estate.

We objectively compare and analyze your facility’s current real-world income against the projected rental income if converted to a standard lease, based on Osaka market data. We support you, as experts, in making the most important and difficult management decision: whether you should truly “convert to rental now” or “continue operating as minpaku with improved management.”

If you do decide to move forward with the conversion, we can also provide comprehensive, one-stop support in partnership with a trusted real estate agency—from smoothly finding tenants to handling the troublesome procedure of filing the minpaku discontinuation notice.

What is the best choice for your asset right now?

Why not find that answer together with us? Before making the major decision to change your operational strategy, please consult with us once as a second opinion.