In a new scandal, LeoPalace21, the operator of over 30,000 budget apartment units across Japan, announced on February 7th that it has confirmed construction failures in walls and ceilings of 1,324 apartment buildings it operates in 33 prefectures. This admission follows the company’s disclosure last May that it had found shoddy construction in hundreds of its apartments in 12 prefectures.
LeoPalace21 to Bear Relocation Costs for 7,700+ Tenants
In yesterday’s announcement, the company disclosed that a total of 14,443 tenants currently live in buildings with construction failures. LeoPalace21 says that starting on February 8th, it will be contacting by phone 7,782 tenants living in 641 buildings found to have insufficient fireproofing in ceilings and walls to urge them to move. The company will bear relocation costs for these residents. Following this, it will contact the remainder of the 14,400+ affected tenants also to recommend that they move.
In full disclosure, Real Estate Japan currently lists LeoPalace 21 apartments for rent on our site.
Which LeoPalace21 buildings are affected and why
Following last May’s admission of shoddy construction in hundreds of its buildings, the company voluntarily carried out inspections of all of its properties. In yesterday’s announcement, the following types of buildings, constructed between 1996 and 2001, were found to be in violation of the Building Standards Law:
- 641 “Gold Residence” buildings: problems with ceilings
- 326 “New Gold Residence” buildings: problems with outer walls
- 53 “Villa Alta” buildings: problems with outer walls
The Building Standards Law establishes construction standards designed to enable a 3-story apartment building to maintain its structural integrity for one hour, even if the floor is burning. In the 641 “Gold Residence” LeoPalace21 buildings mentioned above, the ceiling area immediately beneath upper floors were found to be constructed in such a way that did not follow construction blueprints. This effectively made them non-compliant with the Building Standards Law.
LeoPalace21 said in its announcement that the company recognizes that it is dangerous to live in the buildings because they do not meet fire-resistance standards.
Hideyo Fukayama, President of LeoPalace21 apologized for the construction failures and said that he may resign as a result of the scandal.
The company also revealed that the construction failures were caused by trying to “improve work efficiency” at construction site.
In separate findings, it was disclosed that it is highly likely that other LeoPalace21 buildings are in violation of the Building Standards Law due to insufficient soundproofing in interior walls; and other buildings, with insufficient fireproofing in outer walls, are also non-compliant with building codes.
LeoPalace21 has posted repair construction costs as an extraordinary loss in its financial statements. Consolidated losses for the current quarter (ending in March 2019) are expected to increase to between 38 billion JPY and 40 billion JPY.
The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) has instructed LeoPalace21 to report the cause of the construction failures and to take measures to prevent their recurrence.
LeoPalace21 has set up a dedicated phone line for affected tenants (in Japanese): 0120-590-080
For LeoPalace21 building owners (in Japanese): 0120-082-991
Lead photo: Interior of a typical LeoPalace21 apartment
Sources: Nikkei Shinbun, February 7 and Mainichi Shinbun, February 8