In this article, we explain Common Area Maintenance (CAM) fees and repair reserve funds in Japan and how they affect property owners and tenants.
Common Area Maintenance (CAM) fees (kyouekihi, 共益費), also known as Management Fees (kanrihi, 管理費) are terms used to describe more or less the same thing, which is the fee for the maintenance of the common areas in a building. Some examples are utilities for the common space, elevator maintenance, landscaping, and legally required inspections etc. The term “management fees” becomes more prevalent in large-size apartment buildings which require more intricate building maintenance activities.
CAM fees are different than fees for the repair reserve fund.
Repair Reserve Fund
In a condominium building, the repair reserve fund is collected each month from the owners of each of the apartments and is used for major repairs and maintenance.
Those funds are collected into a savings account for future work on the whole building, e.g. exterior renewals, necessary structural repairs or replacing old equipment. They are collected on a long-term accumulation basis accordingly to the capital needed for the long-term repair reserve plan.
The older the building gets, the higher the monthly repair reserve requirements become, in order to cover possible big repairs. One example for older buildings would be retrofitting them to new earthquake building standards. In some cases, the balance of the repair reserve fund is not sufficient. In these cases, owners might be asked to provide additional funding.
When you purchase a brand new condominium you will be asked to contribute a one-off amount to the repair reserve fund. If you purchase a condominium second-hand, you will have to pay whatever the set monthly amount is for the repair reserve fund.
However, if the previous owner is behind on their building fees, you, as the next owner will also be responsible for paying back any unpaid fees to the management company. As part of the due diligence in buying a unit in a condominium, buyers should check to see if the current owner has fallen behind on fees.
After purchasing a property, the owner has to pay monthly fees to the building management association to maintain the building in good condition. In the case of a condominium, these common-area maintenance costs are divided among all owners in the building, based on the size of the actual unit they own.
These costs also vary from building to building, depending on factors like unit size, whether the building has elevators, the size of the common areas, and if staff is present on-site, etc. The fees will also likely be higher if the building has a gym, swimming pool and a dedicated management office, etc.
How are fees decided?
In a condominium building, Common Area Management fees and repair fund fees are set by the management association (similar to a Homeowners Association [HOA] in the United States), which is comprised of the individual unit owners in the building.
In a newly-constructed apartment building, fees are set by the building’s management company, but these can be subsequently amended by the tenants via the management association.
In general, management fees plus repair reserve fees usually equal about ¥300 per sqm to ¥400 per sqm multiplied by the floor size of the individual apartment.
As a landlord, management fees are deductible as an expense when you or your tax consultant are doing your tax return. Repair reserve fund fees are only deductible when certain conditions are fulfilled. Please ask your tax representative for details or check the homepage of the National Tax Agency (Japanese only).
How do I pay these fees?
If you live in Japan and have a bank account here, you can simply have these fees automatically deducted from your account.
However, in general, non-residents cannot open a bank account in Japan, which is why some property managers will offer proxy payment service for overseas owners. Fees will in this case be deducted from your rental income.
Do I have to pay the these fees?
Yes, you are required to pay Common Area Maintenance and repair fund fees.
If you are behind on payments, the management association will send letters requesting that payment be made. Ultimately, the management association could take legal action against a delinquent owner, resulting in the property being declared in foreclosure.
Tenant’s Perspective: “Hidden” Cost
When you are renting an apartment in Japan and there is no stated common area fee or management fee then these costs will be included in the total monthly rent amount.
On Real Estate Japan’s rental listing pages, the Common Area Maintenance fee is referred to as a maintenance fee.
A landlord can choose to advertise a property without mentioning that there is a maintenance fee by folding this cost into the stated monthly rent. However, the total monthly cost to the tenant is the same.
Listing 1: Rent ¥115,000 (including management fees)
Listing 2: Rent ¥99,000 + management fee 16,000 Yen
When potential renters search for listings, the second listing will show up in searches where the maximum rent is set to ¥100,000. The first will not. However, the actual total monthly income for the landlord is the same. This is a tip to keep in mind if you are a landlord looking to put your property in front of a broader market.
Another thing to keep in mind is that a lower monthly base rent means lower key money and security deposit since they are based on the base rent (exclusive of the management fee). This can result in a lot of initial savings for potential tenants.
If you are interested in learning more about CAM and repair fees or other aspects of property management in Japan, please contact Tokyu Housing Lease, one of the leading property management companies in Japan. Please fill out the form below and a representative will contact you shortly.
Top photo: Front desk in the high-end Azabu Gardens West condominium building, Tokyo