Property Hoarding by Realtors Targeted, But Who Will Enforce It?

Malicious poaching would run rampant

The Ministry of Land, Infrastructure, Transport, and Tourism revised the Enforcement Regulations of the Building Lots and Buildings Transaction Business Law in January 2025 to introduce regulations aimed at preventing enclosure by real estate brokers.

What is enclosure by real estate brokers?

In the sale and purchase of used homes, both the seller and the buyer pay a brokerage fee to the real estate broker.

Enclosure refers to when Broker A, who receives the seller’s request, obstructs the transaction from being completed by not providing accurate information, even when Broker B, representing the buyer, makes an inquiry about purchasing the property. This is done so that Broker A can earn a commission not only from the seller but also from the buyer. This kind of “enclosure” by brokers is rampant in the used home market.

For example, if the seller’s desired sale price is 100 million yen (brokerage fee of 3.06 million yen), even if Broker B offers to purchase at the same price, Broker A may find a buyer at a lower price, such as 90 million yen, in order to earn a double commission (276,000 yen x 2).

The seller loses out, as the transaction takes longer and the sale price decreases.

Although there is no accurate survey of the situation, Naoya Yamamoto, Vice President of Rakurada Real Estate (Shibuya-ku, Tokyo), says, “We feel that about 50% of used property transactions in Tokyo involve this practice.”

The Sophistication of Enclosure

Mr. Yamamoto mentioned, “In the past, if you called the seller’s brokerage to inquire about a property, they would often say, ‘It’s under negotiation,’ which was a clear case of enclosure,’ but recently, it has become much more sophisticated.”

He shared an example of a case where he suspected enclosure in a transaction.

In the sale of used properties, it is common for potential buyers to view the property in person, known as a showing. When a request for a showing is made by the buyer’s broker B to the seller’s broker A, A often provides reasons to prevent the showing and uses the time to find a buyer themselves.

To delay the showing, reasons such as “The seller’s schedule is not available,” or “The agent is absent” are often given. In cases where the agent is absent, even if a callback is requested, it can take a long time to get a response.

Mr. Yamamoto recalled, “I have experienced cases where I was waiting for a showing, and by the time I realized it, the property had already been sold. Waiting for about a month is not uncommon, and sometimes it took as long as two months. Moreover, it was difficult to confirm if it was indeed an enclosure.”

What do you mean by no one to enforce the law?

Such enclosure harms the interests of the seller, which is why the government has taken action with the aforementioned regulations. However, voices within the industry are questioning the effectiveness of these regulations. The reason for this is the issue of who will enforce the law.

What exactly is the new enclosure regulation introduced by the government?

In used property sales, the real estate agent who receives the sales request registers the property information in a network system called “REINS” (Real Estate Information Network System), which is accessible to the buyer’s agent.

This time, the Ministry of Land, Infrastructure, Transport, and Tourism (MLIT) has amended the enforcement regulations of the Building Lots and Buildings Transaction Business Law, making the registration of this property information mandatory. The aim is to prevent brokers from registering false information and to correct the issue of enclosure.

Officials from MLIT and the real estate industry related departments said, “If the registration of transaction details is found to be false, it will be subject to administrative guidance.” The local government, which is the licensing authority, will instruct the brokers to correct any violations, and if they do not comply, further guidance will be given.

“Neither the seller nor the local government officials can view the registration information!?”

However, the issue lies in who will identify and take action against the violations. Reins can only be accessed by real estate agents, and consumers cannot view it.

A Reins official said, “Even local government officials cannot view it directly,” and the authorities cannot check each individual transaction status one by one.