By Jeff Wynkoop
In this article, we discuss specific issues relating to buying a condominium in Japan. For an overview of the process of buying a property, please see: Guide to Buying a Home in Japan.
Buying a condo is not like buying a detached house because a condo is part of a larger building. The Homeowners’ Association (管理組合, or kanri kumiai) is the governing body of a condominium building, and it is legally responsible for maintenance of the building’s common areas and taking care of the property as a whole. A good Homeowners’ Association makes sure to take care of the building in an ongoing fashion, rather than waiting for things to break down.
There are condo bylaws (the “Bylaws”, 規約 kiyaku) which are the rules that indicate the rights and duties of all co-owners in the building. Some of the contents of the bylaws are mandatory, and some of them may be changed by a vote of the Homeowners’ Association. For instance, in accordance with the Japanese Condominium Law, a Homeowners’ Association meeting must be held at least once a year.
Although there are exceptions, for a Homeowners’ Association vote to pass, in general both at least 50% of all of the individual co-owners, and co-owners holding ownership of at least 50% of the total exclusive area in the condo, must agree. Condo owners have voting rights based on per property ownership as well as the relative size of their privately-owned area in the building. This means that many minority co-owners can vote together to block the actions of one or more co-owners holding over 50% of the total exclusive area of the building, but one or several co-owners holding over 50% of the total exclusive area can also block a vote of all co-owners.
Costs and Issues Specific to Condos
The following are some fees and issues you should be aware of when buying a condominium property in Japan.
Repair Reserve Fund
In most cases, there is a special one-time payment buyers must pay into the repair reserve fund at the time of purchase. In the Tokyo area, this is usually approximately ¥400,000, but the exact amount depends on a variety of factors such as how old the building is, how expensive the condo is per tsubo (one tsubo is equal to 3.31-sqm), etc. Condos have regular repair reserve fees so that at the time a major renovation is necessary, there is some money already saved up. There may be additional charges to all co-owners at the time a renovation is decided as well.
Management fees are usually 10,000-20,000JPY per month, depending on the size and age of the building etc., but these can change over time. More expensive properties have higher management fees. Fees are paid per owner, so if your seller is not paid up at the time of transfer, you may have unforeseen liability. The amount of the management fee (and repair reserve fee) will depend on the relative size of your condo in the building. Owners of larger condos are required to pay higher fees.
Repair Reserve Fees
Repair reserve fees average between ¥5,000 and ¥15,000 per month, but these can change over time, and more expensive properties have higher repair reserve fees. For older buildings, these amounts may be much more (in preparation for a major renovation). Fees are paid per co-owner, so if your seller is not paid up, you may have unforeseen liability.
Other Issues to be Aware Of
- Homeowners’ Association meetings and minutes may only be in Japanese, and they may be difficult for foreigners to follow. Absent co-owners sometimes need to hire a representative to be present to take part in Homeowners’ Association Meetings.
- If you buy a condo in an older property, there is a risk that in a few years the building may have to be torn down, and a new building built. This is a matter for a Homeowners’ Association vote, and the percentage of votes for approval are higher than the normal majority rule. There can be deadlock when some co-owners do not have extra money to pay for a total tear down and rebuild.
- As a general rule, south-facing condos are more valuable because they get the most sunlight. In addition, condos on higher floors are more valuable because of the potential for a nice view of the city. Condos on lower floors are more susceptible to crime and more affected by street noise.
- Keep in mind that some developers like to set unusually low management and repair reserve fees when the building is new, only to change them once the building is filled up. Usually fees go up incrementally, the older a building is, but management companies can sometimes insist on big fee changes.
Questions to Ask
The following are other issues and questions to considering when you are doing due diligence.
- Review the Bylaws and Homeowners’ Association minutes over the prior few years
- Is parking space included? Are there any extra fees?
- Are utilities separately metered?
- Are there any separate trunk rooms? Are there any extra fees?
- Are there any major renovations planned or discussed?
- Check the building insurance policy and make sure the common areas are insured
- What is the current balance of the reserve fund? Does the Homeowners’ Association have any special loans taken out? For more information, review a copy of the income statement and balance sheet of the Homeowners’ Association
- How well is the property maintained? Review the property’s Long Term Capital Expenditure Plan (長期修繕計画書 chouki keikakusho)
- Do the bylaws allow pets?
- Is your seller paid up for past management fees/repair reserve fees? Are all of the other co-owners in the building paid up?
- Are the rooms even in size, or are some so small they are hard to use? Is there an unusual floor plan (for example, an outside doorway through the kitchen)?
- Is the building on reclaimed land? Will the Homeowners’ Association be legally authorized to rebuild the building in the future, or is there some kind of legal restriction? (既存不適格 kizonfutekikaku ‘grandfathered building’ refers to a building that was legal under the Building Standards Law at the time it was built, but due to a change in the law, would not be allowed to be built today. These buildings may still be used at present (they are ‘grandfathered’ in), but they are restricted from being rebuilt or added on to without being brought up to current code.)
- Are the neighbors noisy? Is there an expressway nearby?
- How many elevators are there? Are there emergency elevators?
- What are your rights to the grounds around the building?
- Is the building designed to resist earthquakes?
- Does the building have a gym, a pool, or concierge service?
There are some real estate agents in Japan who will try to push buyers to make a quick purchase decision. If the real estate agent says they know of all properties in the market, you should take this with a grain of salt. If the agent tries to press you to buy by saying things like “there are other buyers interested”, perhaps you should consider discussing your plans with another agent. Buying a new residence is a big investment, and it doesn’t hurt to shop around for the right person to help guide you through the process. Take your time, and make a decision that is right for you.
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