What to Know About Defects Problems and Industry Issues in Japan Before You Buy a Condo

In Japan’s condominium industry, there are some serious issues.
In 2015,  there was a huge scandal involving the condo complex called
“Park city La La Yokohama” developed by Mitsui Fudosan.

Mitsui Fudosan is the top developer in Japan.

Construction based on false data was carried out in October 2015, and a scandal where the building was inclined was discovered because the plurality of piles did not reach the appropriate depth in the ground. Safety for earthquake resistance was suspected.When Mitsui Fudosan and Mitsui Sumitomo Construction investigated in August 2015 after receiving a  complaint by several residents that the handrail is misdirected.It was leaned in one of the four buildings. According to Mitsui Fudosan, the survey was conducted from November 2014.
According to the survey, when examining 28 of the 52 piles in the inclined ridge, there are 6 piles that have not reached the support layer of the ground, 2 piles with insufficient length. The false data was created to pretend that the ground survey was done. Initially, Mitsui Fudosan was defending as the impact of the Great East Japan Earthquake was causing the problem.
Based on the resistance standards stipulated by law,  there is a possibility of collapse if severe earthquake of seismic intensity 7 class occurs.

Why did this false data test happen ?

Things you need to know about the industry

1 Too complex business structure

In a private condominium which is newly built , the developer creates the grand landscapes (concepts) such as acquiring the land, what kind of building is built on the land, the arrangement of the green space, the number and arrangement of parking lots.
It is the design office’s job to design the building based on the concept.
Design office received consignment from the developer. The structure of the project is often very complex and the accountability of each player sometimes is not very clear.The pyramid structure is also a big issue.
Horizontally, there are cases where as many as 30 companies are engaged in construction in the case of large-scale construction projects like condominiums. It is not easy for 30 companies to work in relation to each other in complicated ways. It is also worth noting that general contractors are not necessarily equipped with construction capabilities and skills. Also, many of the specialists who are located in the lowest layer of the multi-layers with the general contractor as the top and actually do construction work on the site are contract workers of day labor rather than permanent employees.Because it is a day labor, if it rains and work can not be done, the daily salary will not be paid.
They do not have paid vacation, either. It is no wonder that craftsmen trying to finish off work just to reach the acceptable quality with such a poor work environment.

2. lack of skilled workers.
The design office is mostly supervising construction work but they are assigned the job by their customers namely general contractors. 
The general contractor will order from a piling construction company, a distribution company construction company, an electric equipment construction company, and a plumbing sanitation facilities company. Each supplier often again subcontract to the next layer. After the complex is completed, the real estate companies will sell each unit.
Many young workers at sites leave the industry due to poor working conditions and the construction industry has been undergoing shortage of staffing requirements for a long time, Meanwhile, the general contractor company has let experienced staff due to age restrictions, restructuring.
3 Very aggressive schedule
Another cause of inducing defects is pressure of strict project management.

Brand-new condominium units in Japan are usually sold as pre-built.

Sales will be done before the building is completed.

In some case, sale is done even before the construction starts.

Developers pressurize the general contractor to complete the complex as soon as possible.

For developers, Incentive trying to recover the invested funds by executing contracts of each unit is very strong.

If the construction period is delayed, the delivery of the property will be delayed and the  recoup of funds shall be delayed. Developers put a strong pressure on general contractors.

To meet the deadline, there is a risk that scraping work is done.

In addition, workers at the site sometimes must work until midnight to comply with the contractual period.

You can imagine there are many risks of human mistakes by all means.

4 Lack of quality control
Construction management and quality control are particularly important for large projects such as condominium construction.

However, depending on apartments, there is no third party supervisor who actually exercise the oversight.

In cases where construction management by an external design office is not functioning well

Mitsubishi Jisho develops in 2013 and Kajima Corporation undertakes construction

In Aoyama’s luxury condominium construction,  there are serious flaws in plumbing etc.

It has developed into a big problem that shakes society. The cause of the problem may be various, but the biggest cause is that the construction supervision was not carried out correctly.

After all, I don’t recommend to buy a brand-new condominium in Japan.

Instead, if you really want to buy a condo property, I would recommend you to buy a second-hand property with the age of 10-13 years old. After 10-13 years, the property (building) usually has just finished the first major work of repair after the complex opened.

Here are four major points when looking at a second-hand condo in Japan.

1 Please be sure to check that maintenance and management on living environments are properly done.

In condominiums, daily management work such as cleaning and errands are mostly outsourcing operations to outside management companies. Make sure to visit the property several times before purchasing the property and check with your own eyes whether cleaning and noise management etc. are performed properly.

2 Maintenance of building for your life-long asset 

Your apartment is the asset. Whether the asset value of your apartment is maintained properly in the future or not will be very important from the viewpoint of the finance.

Make sure to check beforehand whether the condo association has the long term major repair plan and whether the plan is valid. The Ministry of Land, Infrastructure and Transport announces ‘long-term repair plan preparation guideline’. Please compare the difference between the official guidelines and long-term plan owned by your condominium association.  If you can find irregular repairs are frequently done in the apartment, there is a risk that the building is defective or the maintenance of the building is not performed appropriately. 

3 Physical maintenance of the building

Major repair work on waterproof construction on the rooftop is usually conducted 10 years after the completion of the building. Developer’s guarantee on rooftop leakage is only good for 10 years.

Please check the durability of the building properly. 

Moreover, in the condominium which has been completed more than 10 years after the completion, the reserve fund reserve could be short. This problem is common. 

Normally, developers set low reserve funds money at the time of new construction. 

If the repair reserve fund is too high, the budget of buyers could be hit and put off the buyers. 

However, the building always deteriorates every year regardless of the amount of repair and reserve fund.

Please verify the amount is set to the appropriate level.

The standard amount of repair and reserve funds recommended by the Ministry of Land, Infrastructure and Transport is 218 yen per one m2.

If the amount of reserve fund is remarkably lower than this standard rate, there is a possibility that future budget shortage will be caused and the health of the apartment building could not be maintained.

In addition, it is common to see a few association members of the condominium are behind the payment of the management fee and the reserve funds, so make sure to learn whether there are many delinquents.

4 Management status of management association

Management condominium associations elect several members of the residents and appoint them as

the directors of the board. Thus the directors of the board is responsible for the management of the apartment. You always want to check the activities of the directors of the board in advance and see if they are actively working. You can ask your agent for minutes of the Board of Directors and the members’ general meeting. If you can discover discussion on the revision of the monthly administrative expenses and repair and reserve funds etc., it is the good evidence that the activities of the board of directors and management associations are conducted in the good manner. It is a good sign.  According to the announcement of the Ministry of Land, Infrastructure, Transport and Tourism, there are 37% associations who are facing the payment problem where some members are not paying administrative expenses, repair and reserve funds.

Final thoughts

The book I refer is insisting that 90% of condo buildings in Japan have some defects.
Of course most of them are not serious defects but you have to face another inconvenient truth about the constructions in Japan.

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Reference: 新築マンションは9割が欠陥

Toshihiko Yamamoto
Real estate investing consultant and author.
Founder of Yamamoto Property Advisory in Tokyo.
International property Investment consultant and licensed
real estate broker (Japan).
He serves the foreign companies and individuals to buy and sell
the real estates in Japan as well as own homes.
He holds a Bachelor’s degree in Economics from
Osaka Prefecture University in Japan
and an MBA from Bond University in Australia

Toshihiko’s book, “The Savvy Foreign Investor’s Guide to Japanese Properties: How to Expertly Buy, Manage and Sell Real Estate in Japan”is now out on Amazon, iBooks (iTunes, Apple) and Google Play.
About the book  
Amazon.com Link

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