Japanese Condominium Ownership Legal Quirks

When you purchase land, a house or a whole building, some knowledge of local laws and regulations may be useful. But what about an apartment? It's much different as you don't own either land or the whole structure. We'll try to figure out what are the quirks.

We already made an entry about the new Condominium Law to be introduced the following year, so if you've been following us, you might remember that many important decisions concerning the building management are made at a Homeowners Association meeting. Let's remember this notion because it would appear a lot.

A Homeowners Association is an administration body appointed to manage the building's common areas and to be in charge for the whole building's maintenance. The Homeowners Association is legally responsible for the most of the major decisions and issue solving, such as large-scale renovations, implementation of any new services or systems. If you are lucky to purchase a unit in a building managed by a considerate Homeowners Association, you can feel totally safe about your property even staying far away from Japan.

If you purchase a condominium unit in Japan, your rights and responsibilities would be regulated by so-called bylaws. They are partially obligatory to abide, but some paragraphs are flexible and able to undergo amendments if the Homeowners Association decides on them. Also, according to the Law, a Homeowners Association meeting must be held at least once in a year.

As a rule, the standard bylaws are established by the land owner or the company initially selling the condo units as a draft with no legally binding force and with a flexible paragraphs to be adapted easily. Later on, some new bylaws may be added by the Homeowners Association if at least 75% votes pro at the discussion.

But what happens when real issue appears? For example, in recent years a great trouble is the management of the older condominiums which lack modern seismic resistant reinforcement measures. If a Homeowners Association agrees on massive renovation, the total cost will be divided between the all unit owners. But here comes the legislative quirk to be better aware of. A building can be also totally demolished whatever the reason is if there's at least 4/5 majority of votes. Sometimes it's decided to do so when the building is too shabby and can't attract enough tenants to keep up the unit owners' interests. Don't worry, in most cases your property won't simply disappear. A decision to demolish the building on the whole is often made simultaneously with the approval of the total reconstruction plan, so each unit owner would legally have a right to receive a same value share of the newly constructed condominium building to replace the previous one. The only dissatisfying point is that both the demolition and reconstruction costs would be covered by the unit owners. Also, remember if you happened to vote against demolition or reconstruction and refused to cover the expenses of those, you may be forced to sell your share by its market value.

As a homeowner, you have a right to speak up and to be heard at the Homeowners Association meeting. If you have any suggestions or wishes, you can always put them to the discussion. If you are physically unable to attend the meeting, you always can hire a person to act as your representative, which is highly recommended. It would also be practical to examine the current bylaws and the latest Homeowners Association meetings minutes before you purchase a unit. Being aware of the Long-Term Capital Expenditure Plan is also smart, as you can see clearly what are the prospect expenses and are there any special loans taken by the Homeowners Association. As a condominium unit owner, you would be monthly charged with a management fee and repair reserve fees which are both calculated to serve the Long-Term Capital Expenditure Plan.

We generally discourage investing in really old properties, as this may lead to a lot of financial and legal issues in future. Still, if you are decided on a property older than 30 years, try to learn as much as possible about the building management budget and plans to secure your share. Not all of the Japanese condos constructed in the mid-90s are in poor condition, so a well-preserved building with a smart management plan may be a good decision for your investment.

If you are attracted by the freshly constructed condominium with a close to zero-yen management and repair reserve fee you' d better keep in mind that the older the building becomes the more the repair reserve fee rises. So, if your choice fell on a luxury property, be ready for a dramatic rise in monthly fees.