We get really big news for Japanese property owners. The Law Concerning Sectional Building Ownership is planned to be revised for the first time in almost 60 years! Let's see what are the benefits of the upcoming law amendment and what does it have to do with the foreign property investors owning apartment units in condo buildings. First, we need to mention the legal background of the upcoming Law revision. There are thousands of buildings in need of major renovation across Japan. Still, because of the existing 1962 Sectional Ownership Law the renovation process won't proceed smoothly as large-scale repair works has a high minimum approval threshold almost unreachable with the existing non-resident owners' rights limitations. With the Law ammendment to be enforced, a continuous proxy system for non-resident owners would be introduced along with a court-appointed representative enabled to vote for the renovation plan in the name of the home owner.
The Legislative Council of the Ministry of Justice officially advised to start the Law amendment legal implementation procedure on the June 8, 2023 with the public comment period scheduled for July. If everything goes according to plan, the revised Law will come into effect in 2024.
When you purchase a unit in a condominium, a common question you would ask the seller are the details about the building repair reserve. Considering the rapid increase of labor and construction materials cost within the past decade, most of the owners have to top the repair reserve considerably before a major renovation will take place. To speak in numbers, that would be around 1 million yen (around $ 7,000) per a condo unit.
As a rule, condominium buildings are to schedule major repairment works at least once in 30 years, but the condos with considerate management companies enlisted get a repairment once in 10 -15 years. If the units of the same building belong to several owners when it comes to decide if the repairment will take place or not, legal issues freeze the process and as a result, the building keeps on getting older and shabbier with the estimate repair cost topping the total building demolishing cost. By this year, almost 3 million of condominium buildings in Japan are 30 years and older, and just in 2 decades this number is estimated to reach 6 million. If those buildings will be managed properly with schedule repairment works, they will remain safe for use for almost a century and a half. Yet without required mainrenance most of those buildings would possibly face beyond repair state of decay. This is one of the main reasons to eforce the Law amendment.
So, why all of these buildings just can't get repairment? The problem is the legal issue. To have the renovation plan approved, it must be discussed at the homeowners association meeting. The current Law states that at least 75% of the owners must agree on the plan. But to get the voting confirmed valid, more than 74% of the condominium unit owners must be present at that meeting. In most of the cases it's physically impossible, especially if the owners reside abroad or simply don't have the time in their schedule to attend. So, according to the Ministry of Land, Infrastructure and Transport data, nearly 30% of homeowners association meetings fail to reach the attendancy rate required for any decision.
What would you do if you purchase a unit at such a low meeting attendancy building?
For example, the property you invested in has water leaks after heavy rains or some wall cracks on the facade. You won't have to put up with such troubles from now on! The concept of the Law amendment is in the draft state but possibly the homeowners association meeting attendancy rate to get the renovation plan approved is expected to be lowered to 66%. That means you're getting the desired renovation easier.
Another, maybe a less convenient idea is to remove the requirement for an attendancy rate, which means a resolution has a chance to pass with any number of people present during the vote. If that makes up a worse scenario, according to some building management rules, a major renovation plan may be accepted without being noticed by those owners who didn't attend the meeting. As a result, no attendance means possibility of recieving a surprise invoices. That's why the new Law has almost a half year of pending period.
Let's be patient and wait what ammendment we'll get in the end!
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