Management Association of Condominiums in Japan

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(Updated on December 28, 2016)

What are management associations?

A management association is an association to manage a condominium, composed of unit owners who purchased a unit of such condominium. In Japan, when you purchase a condominium unit, you automatically become a member of the management association of the condominium, and cannot leave the association by preference unless you are no longer a unit owner by selling your unit or other reasons. Management associations play significant roles in preserving the asset value of condominiums. Without proper management, any real estate property can decrease its value due to reasons such as deterioration over time. If a condominium is leased to tenants by the owner of the entire building, the owner him/herself manages the building on his/her own judgements. However, in a condominium sold in lots, a part of its building (the common area) and the land are jointly owned by all unit owners, and therefore, a consensus is required from all unit owners with respect to the maintenance and management of them. This is why management associations are established.

Roles of management associations in Japan

Article 3 of the Condominium Unit Ownership Act (Act on Building Unit Ownership, etc.) provides that “all of the unit owners together may organize an association to manage the building, its grounds, and its ancillary facilities and, pursuant to the provisions of this Act, may hold meetings, establish bylaws, and assign a manager.” In other words, a management association is a body based on the Condominium Unit Ownership Act that is composed of all unit owners and engages in maintenance and management of the common area, which is jointly owned by the unit owners. Broadly, a management association engages in three areas: the maintenance and management of the common area, the management of community life, and the management of the management association itself. As concrete roles of the management association, the following 17 points are given in the Standard Management Agreements published by the Ministry of Land, Infrastructure, Transport and Tourism, which are referred to by many condominiums.

 

1) Preservation, conservation, maintenance, cleaning, sterilization, and waste treatment in the grounds and common area managed by the management association

2) Repairs of the part of the property managed by the association

3) Points related to the preparation of or the change in the long-term repair plan

4) Points related to the investigation on matters required to reach a consensus on the reconstruction of the building

5) Management of the drawings and specifications of the design delivered by the seller’s real estate company

6) Arrangement and management of historical information on repairs, etc.

7) Points related to fire insurance and other non-life insurance to cover common area, etc.

8) Management affairs considered to be appropriate for the association to conduct for a privately used area managed by a unit owner

9) To make changes to and look after the grounds and common area, etc.

10) Management of funds reserved for repairs

11) Public relation activities with the government and other public offices and neighborhood associations

12) Affairs related to maintaining public morals, discipline, and safety

13) Affairs related to disaster prevention

14) Public relations and communications affairs
15) Forming a community among residents with consideration for the local community
16) Liquidation of residual assets upon the extinction of the management association
17) Other points necessary to promote the common interest of association members and to secure a benign living environment

 

To carry out such points as mentioned above, it is common to establish management bylaws, which are the basic rules to operate the management associations, and to place a manager to perform management affairs. Board members of the management association, who are elected at the general meeting, are called Riji, while their representative is called Rijicho, in other words a manager referred to above.

 

Many of the above affairs are difficult for management associations and managers to carry out on their own and are outsourced to condominium management companies. In many cases, troubleshooting for issues within the condominium and collection and management of management fees are outsourced to management companies. The management association is often confused with the management company, but it is the management association that is in charge of condominium management and not the management company. However, in many recent cases of newly built condominium properties, a management company is fixed beforehand and such company takes the initiative in management affairs of the condominium. Unfortunately, there were some cases where management companies did more than they were asked to do and charged excessive fees. In other cases, the management companies that were entrusted to manage management fees, etc., went bankrupt and the fees, etc., could not be recovered. Affected by such cases, the tendency to rely on management companies is starting to be reconsidered. In relation to this, the “Act on Advancement of Proper Condominium Management,” enforced in 2001, encourages unit owners to become aware that they are the ones who take the initiative in managing their property.

 

Authorities of management associations in Japan

The highest decision-making body of the management association is the general meeting of the management association. Among such are ordinary general meetings, which are held regularly once or more a year, and extraordinary general meetings, held whenever needed. At ordinary general meetings, resolutions are made concerning matters such as financial results, activity reports, budgetary discussion, and board member elections of the management association. In principle, discussed matters at general meetings are resolved with a majority of voting rights held by members attending the meeting. In standard management bylaws, one voting right is granted to each unit owned by the member.

 

The voting rights held by unit owners that are exercised for large-scale repairs, reconstruction, and other matters to be resolved, are not only rights but also obligations that accompany the management to be conducted by the management association. To carry out the decisions made by unit owners at the general meeting, the board members elected by the resolution of the general meeting conduct actual management affairs in collaboration with the management company, in accordance with the management bylaws determined by the general meeting.

 

 

Challenges facing management associations in Japan

Unit owners of condominiums are allowed to renovate their privately used area to the extent permitted in the management bylaws. However, it is to be noted that such renovations usually require the approval of the management association of the condominium. This requirement is made to prevent the possibilities of problems among the owners, when the renovation affects the common area or other unit owners.

 

The issue recently discussed in many general meetings is “minpaku.” Various problems are caused in association with the increase in property owners renting their property through the Internet, etc. More condominiums now prohibit minpaku in the management bylaws for reasons such as waste treatment, disturbing noise in late hours, bad manners in the common area, and the possibilities of becoming hotbeds of crime. This is due to the fact that once these kinds of problems are known to the public, the asset value of the condominium will see a quick fall.

 

 

While the associations have to face such kind of complicated problems, the aging of the association members and the increases in leasing contracts and vacant houses are leading to fewer participants at the general meetings and fewer members willing to become board members. Some board members are forced to assume the same position for consecutive years, showing how large a burden is imposed on board members. Furthermore, since management fees are getting harder to collect, cases such as maintenance procedures for the building cannot be done due to the lack of funds for repairs, etc., are increasing.

 

 

The management status of a property depends largely on whether the management association of the property is functioning properly and responding to the surrounding changes. Therefore, when you select a property to purchase or to lease, you should not be reluctant to collect information on management associations and management companies, which determine the asset value of the property. Also, when you have become a unit owner of a condominium, you should willingly participate in the management of the condominium so as to sustain its asset value.

 

 

 

 

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