Know your seller: Fraudsters in Tokyo Real Estate

Fraud in Tokyo real estate is relatively rare however it does happen and it requires buyers to have a healthy dose of skepticism together with a trust-but-verify mentality.

This can prove especially difficult if you can not speak or read Japanese, however even Japanese people and companies can find themselves on the wrong end of a deal.

On November 8th, 2017, 9 men and women were arrested (Japanese link) for falsely claiming to be the seller of a 378 sqm plot of land in Akasaka 2 chome that the APA Hotel Group paid ¥1.3 billion (roughly US$11.4 million as of today’s writing).

The group, claiming to be relatives of the deceased seller, along with the assistance of unscrupulous judicial scriveners, forged a certificate of registered stamp in addition to other documents to show they were related to the deceased seller.

Source: Mainichi Shinbun

In a trade, it is usually the buy side that chooses the scrivener. It is unclear but likely that the sellers required their own scrivener to be used due to the perceived complication of the inheritance process that needed to be completed prior to this settlement.

Regardless, when it came time to change the title deed to the APA Hotel Group, it was discovered that the certificate of registered seal was a forgery, thus preventing the change of title to take place.

Thereafter, all methods of contact with the fake sellers and their scriveners dried up.

This particular event happened in 2013 but it was only this past week when arrests were made. Recourse can finally begin for the APA Group.

Think this was an isolated incident? In August, 2017, Sekisui House (stock symbol: SKHSY) was swindled for anywhere between ¥52 billion to ¥65 billion (roughly US$45.8 million to US$57.3 million) for a property in Shinagawa Ward near Gotanda Station.

The person claiming to be the seller had a forged passport they used for their identification to prove they were the same person listed on the public land registry as the owner.

This fake seller had also a complete set of other forged documents including a title deed, certificate of registered seal and proof of registered address.

To date, the persons responsible for the fraud have not been seen since the date of the settlement and no money has been recovered.

In the end, all it would’ve taken for this trade to be discovered as fraudulent is someone from Sekisui House to visit Gotanda real estate agents to learn that the owner of the property is famous for refusing to sell.

They also would have learned the real owner is a lot older than the “seller” who submitted their fake passport prior to settlement.

So, what can you do as a buyer to make sure this doesn’t happen to you?

Working with a brokerage that has an independent legal compliance team separate from the sales team will protect your purchase from falling victim to counterfeit sellers.

Housing Japan’s sales team is structured this way; the broker you are working with to buy or sell is supported by an independent legal compliance team to make sure there is no intentional or unintentional illegal activity of any kind.

It is specifically in this area where APA Hotel Group and Sekisui House failed when performing their due diligence. Had their brokers & legal compliance teams been aligned correctly within the companies then their names wouldn’t be in the headlines and the individuals involved would still have careers.

Most importantly, the money lost would have been spent on other, more worthy purposes.

Editor’s Note: Adam German is Vice President of Business Development at Housing Japan and a well-known figure in both the marketing and sales side of Tokyo Real Estate. Originally from Canada, Adam has been behind some of the most successful international residential property services in Tokyo.