While inspecting any property is important, it becomes even more uppermost to check for defects found in second-hand property especially akiya (空き家abandoned houses)
In Japan’s real estate industry, it is generally assumed that there are four types of risks of ‘defects’ （瑕疵）the industry professionals usually recognize.
They are physical defects, psychological defects, environmental defects
and legal defect (issues).
1. What is a physical defect?
Physical flaws are situations where the building leaks, termites occur, and the earthquake resistant strength is insufficient.
Some common physical issues
For example, with 8 million akiya (Abandoned house, 空き家),
old houses are usually very affordable in Japan these days. However, those old houses could also come with a lot of issues that you may not be prepared for.
What seems like a great deal at first may ultimately cost much more than you originally thought.
It is always recommended to do your research before investing in real estate, particularly when the property in question is old property.
The following checklist will give you an idea of what issues to watch out for when buying a second-hand property especially an older home.
Due diligence always pays off.
You want to avoid common physical defects, problems with the construction structure.
Insects and pests
Termite is quite common in Japan so don’t panic.
Please check if the property is inspected for termite and have the proper termite proofing before you move in.
Insects are more common in older homes with older wood that may have water damage.
Termites are something you should take extreme care with when purchasing wooden houses.
Sick-house syndrome
The increasing air tightness of housing and the use of construction and interior finishing materials that release chemical substances have given rise in recent years to indoor air contamination and consequent health difficulties for residents.
Japan’s Building Standards Act regulates the use of chemical substance.
Please check with your agents or construction company before closing the contract.
Asbestos
Japan already banned the use of asbestos in building materials but old houses or condos may have used the asbestos.
Many properties have had the asbestos removed and replaced.But you want to make sure if the property used the asbestos and already removed. If it does, you will need to factor in the costs of removal, which can be quite expensive.
Problems found with the foundation ＆ buried property
The foundation is important for any type of home.
The foundation of homes including newly built homes can be cracked, tilting or sunken.
The foundation issues must be addressed for safety and to keep the home livable.
Foundation repair can be very expensive so you need to keep in mind when you consider the price of the home,
Other common issue you may face is that there is old buried property underneath your land. This is a particularly important issue when you build your own house on the green land.There could be various things such as old building concrete and foundation, pottery fragments, water distribution pipe, septic tank, wood waste, coal glass, vinyl dust. It is not an exaggeration to say that in the redevelopment area and factory site development. It is common for underground obstacles to exist more or less. You need to make sure there no such materials underneath your land.
Your agents are unfamiliar with defect houses
Even veteran agents are not familiar with all possible problems especially
the construction related aspects.
Once you enter into a contract, any subsequent negotiations for needed repairs on the hidden defects can be quite cumbersome and difficult.
You may want to eliminate all potentials problems by your own eyes and the professional inspections.
Please try to find a good agent you can depend on with integrity.You are making a big spending.
Many agents may want to skip the home inspection to speed up the process but is can be a fatal mistake.
2. What is a psychological defect?
Psychological defects are, for example, cases where there is suicide or murder cases in the past in rooms.
Those rooms are lack the comfort of living in psychological aspects.
Japanese tenants usually do not want to rent such rooms.
Under Building Lots and Buildings Transaction Business Act, sellers have the legal obligation to disclose such accidents before hand for both sales and rental, there is no specific guidelines in the obligation to notify the accident property.
These properties are called ‘jikobukken’
Questions such as
How far do we have to go back ?
How specific do we have to be about the accident ?
are remained in grey zone.
In case of legal battles, there are various factors involved in judicial judgment, such as the type of the suicide / murder, the date of progress, the scale, the impact to the residents. In the past cases, the judgment is case by case. ”
The details of the accident must also be explained in the “Important Details and Particulars” document that is signed at the time of contract.
For properties for sale, it is generally assumed that the sellers and agents will inform the buyer if the death occurred within the past 2 years.
For properties for rent, the real estate agent is obligated to inform the very next tenant who moves into the property after the incident, but it is believed there is no obligation to inform any future tenants.
There is always a reason why a property would be priced below the market price, so if you find a property for rent or sale that is priced far below market prices, you need to make sure the reason.
If you do not care about such accident, you may be able to buy the apartment for a reduced price.
There is quite well-know web site which is specialized in information about jikobukken （事故物件）all over Japan but the information is not official and could be
flawed.
Oshima teru jikobukken information site (大島テル）
UR offers the discounted rent for the properties where the former tenants have died (jikobukken)
If you are specifically looking for bargain rent (and you don’t care), UR could be a choice.
The rent for these apartments for first year is half price, after which it goes back to the original rent.
UR tokubetu boshu jutaku (UR 特別募集住宅）
3. What is an environmental defect?
An environmental defect refers to a state in which there is a problem in the surrounding environment of the property.
For example, if there is a yakuza (gangs) office nearby and people who live close to the property can’t have a safe and comfortable life.
Here are so other common problems.
Noise from the neighborhood
Abnormal odor
Issues due to the availability of sunshine
Yakuza office
It is difficult to block out all environmental defects.
But please spend more time on going to the site yourself before purchasing the property to check the surrounding environment or to check whether the property management company has complaints
such as noise, odor from the residents is possible.
In addition, when a Yakuza office is in the same building, the seller has the obligation to notify the buyer.
It is required as by law.
4. What is a legal defect ?
The real estate industry in Japan is regulated very strictly by laws (I sometimes feel it is overly regulated)
There are 9 fields of laws related to the real estate transactions.
As fas as those laws are kept, you don’t have to worry about the risks much.
However, you could face some rogue agents or construction companies with lack of integrity when you buy the real estate.
It is your biggest investment in your life time, so please pay attention to the laws.
(1) Laws concerning land use
– City Planning Act
- National Land Use Planning Act
(2) Laws concerning construction of buildings
-Building Standards Act (for newly built or renovated buildings)
-Act on the Promotion of Popularization of Long-life Quality Housing (for
condominiums)
-Act on the Promotion of the Low-Carbonization of Cities
(3) Laws regulating real estate companies
-Building Lots and Buildings Transaction Business Act
-Act on Advancement of Proper Condominium Management
(4) Laws and regulations concerning advertisement
- Building Lots and Buildings Transaction Business Act
-Fair Competition Codes Concerning Indication of Real Estate
(5) Laws concerning contracts including sales contracts and
lease contracts
-Civil Code
– Building Lots and Buildings Transaction Business Act
-Act on Land and Building Leases
-Consumer Contract Act
(6) Laws concerning title and rights
-Civil Code
- Condominium Unit Ownership Act (for condominiums)
-Act on Land and Building Leases (for renting)
– Act on Facilitation of Reconstruction of Condominiums
(for condominiums)
(7) Laws concerning real property registration
- Real Property Registration Act
(8) Laws concerning condominium management
- Condominium Unit Ownership Act
-Act on Advancement of Proper Condominium Management
(9) Laws concerning defects (faults, etc.) of housing properties
- Civil Code
Housing Quality Assurance Act
-Building Lots and Buildings Transaction Business Act
-Act on Assurance of Performance of
Specified Housing Defect Warranty
I highlight the some important laws concerning the defects. I know understanding the law is a kind of daunting task. However, you are buying the most expensive asset in your life so take a look at the outlines of the relevant laws.
And don’t forget to ask your agents about any questions when you are having concerns.
– Land use related laws
City Planning Act (Ministry of Land, Infrastructure, Transport and Tourism)
（都市計画法）
The City Planning Act has designated such city planning areas as urbanization promotion areas and urbanization control areas, as well as the purposes of land use in the urbanization promotion areas and other matters, in order to prevent towns from being developed in an disorderly manner and becoming harder to live in. For the urbanization promotion areas, there are regulations that affect construction of buildings, such as the building coverage ratio and the floor-area ratio of buildings as well as the purposes of land use.
National Land Use Planning Act (Ministry of Land, Infrastructure, Transport and Tourism)
（国土利用計画法）
The National Land Use Planning Act is a law aimed at realizing comprehensive and systematic use of the national land in order to prevent speculative land transactions, disorganized development or other inappropriate actions in advance. With regard to real estate transactions, the law prescribes that any sale, purchase or exchange of lands having more than acertain degree of size must be filed, among other regulations.
– Construction related laws
Building Standards Act (Ministry of Land, Infrastructure, Transport and Tourism)
(建築基準法）
The Building Standards Act is a law aimed at securing safety, livability and other performances of buildings by establishing minimum standards for construction of buildings. For example, the law provides specific purposes of use (residences, retail facilities, plants, etc.), building height, floor areas and other details for each “zoning” set forth in the City Planning Act.It also prescribes standards on securing safety of buildings, standards on fire prevention and evacuation, among other things.
Act on the Promotion of Popularization of Long-life Quality Housing (Ministry of Land, Infrastructure, Transport and Tourism) (長期優良住宅の普及の促進に関する法律)
The law is aimed at suppressing the discharge of wastes from housing demolitions, etc. and reducing environmental burdens by facilitating a long-term use of housing, and at mitigating financial burdens of residents through a reduction of costs associated with building reconstruction, so that they can live a fuller and gentler life. As accreditation criteria for long-life quality housing, the law designates such performance items as countermeasures against deterioration, earthquake resistance, easiness of maintenance, management and replacement, versatility, barrier freeness,energy saving, living environment, residential unit area and maintenance and management plans.
– Laws regulation the real estate company
Building Lots and Buildings Transaction Business Act (Ministry of Land, Infrastructure, Transport and Tourism) （宅地建物取引業法）
The Building Lots and Buildings Transaction Business Act is a law that, with the aim of protecting consumers in real estate transactions and facilitating trade, regulates the following:
(1) Sale, purchase or exchange of residential lands and buildings conducted by the real estate companies, and
(2) Real estate companies that provide agency or intermediary (brokerage) services for sale, purchase, exchange or leasing. Specifically, the law stipulates a variety of regulations on the services of real estate companies, including regulations on advertisement, obligation to explain important matters (about properties and terms and conditions, etc.) to the buyers or tenants, obligation to issue documents describing the contract details, and regulations on the contract details for the cases in which the real estate companies themselves serve as the seller.
-Laws related to titles and rights
Act on Building Unit Ownership (Ministry of Justice) （区分所有法）
The Act on Building Unit Ownership, etc. is a law that stipulates the rights and obligations with regard to for-sale condominiums and other buildings with unit ownership, as well as items regarding their management. For example, the law stipulates titles and rights regarding exclusive sections, common areas and sites, and items regarding
voting rights at meetings of unit owners.
-Laws concerning real estate registration
Real Property Registration Act (Ministry of Justice) （不動産登記法）
The Real Property Registration Act is a law for securing the rights regarding real estate and facilitating transactions by setting procedures of real property registration.
For example, the law provides the rights to be registered and the content of the registration, required documents and their procedures, and other obligations regarding registration. Furthermore, major revisions were made to the Real Property Registration Act in 2004 (put into force on March 7, 2005), and the registration procedures were also changed significantly,including on-line registration becoming applicable.
-Defects related laws
Building Lots and Buildings Transaction Business Act (Ministry of Land, Infrastructure, Transport and Tourism) （宅地建物取引業法）
Due to the regulations under the Building Lots and Buildings Transaction Business Act, building lots and buildings transaction business operators shall assume warranty against defects for at least two years for the contracts in which they themselves serve as the seller. These provisions are applicable prior to the provisions of the Civil Code. Accordingly, contract articles that contravene these restrictions shall become invalid.
Housing Quality Assurance Act (Ministry of Land, Infrastructure, Transport and Tourism)
(住宅の品質確保の促進等に 関する法律)
The Housing Quality Assurance Act is a law enacted for the purpose of promoting quality assurance of housing, protecting interests of homebuyers, and resolving disputes over housing in a prompt and proper manner, etc.Specifically, the law obliges the sellers, etc. of newly-built housing properties to assume warranty against defects for 10 years,and provides standards for representation of housing performances and the framework to facilitate dispute resolution over housing properties that have undergone housing performance evaluation.This law may be abbreviated as the Quality Assurance Act.
Here are some important common legal defects (issues) you want to avoid.
1.City planned road
Local governments constantly considering the construction of city planned roads to improve the convenience for residents in the area or cope with the increasing traffic.
Some plans can be controversial and sometimes opposed by the residents.
If your property is in the planned area, you may have to
move out of the property in the future.
When the plan is executed, obviously your local government will compensate all the cost at fair value but you still face all sort of stress and hustles.
Please make sure if your property is subject to the city planned road or not before closing the contract.
2． Urbanization control area
Under the city planning law, some areas (zones) are restricted in developing due to the designation as an urbanization-restricted area. And large-scale development, such as constructing a high-rise building, is often restricted.
Even your property is already existing, due to the change of
zoning afterwards, the applicable zoning could already restrict
future development including building a new house on your land.
In other words, if you want to completely demolish the house and build the new one, the zoning code may prevent you from building new house.
3. Joining road
Under the current law, all the premises of the building shall be in contact with the road (excluding the some old properties) for 2 meters or longer.
Old properties which were built before the introduction of the law
are exempted but if you want to build the new house on the land,
you have to abide the current law (because you are building a new house)
An essential condition for a property is that the entrance to each dwelling unit must connect directly to an external path, and this entrance must not be shared with those to the other dwelling units.
If your property (existing property such as very old house you are acquiring) does not meet the requirement , your property will likely have relatively low valuation and banks are not willing to
put up the mortgage loan.
You need to make sure your property fulfills the current legal requirement of having a building site join the road.
4. Boundary line between the neighbors
A lot of properties in Japan don’t have clear boundary between
the neighbors and often boundary is demarcated just by a wall.
If you neighbor is friendly, it will not be an issue but your
neighbor may change in the future.
If the boundary between the neighboring owner is blur,
you are recommended to ask your
seller/agent to complete the official survey by the registered land and building investigator before the contract.
The recommended checklist is hereby attached.
You are welcome to download the pdf file.
Final Thoughts
Japan’s laws regulate the real estate transactions very tightly compared with international standards.
As far as your counterparts such as real estate agents and construction companies are acting with integrity and good faith, you are well protected.
But in reality, there are unfortunately some (not many) rogue players in the fields. Please do your due diligence so that you can avoid significant problems.
Consultation service
Spot consultation is available for those who are interested in buying akiya property.
Spot consultation fee starts from 50,000 yen per two hours (plus tax). Consultation over Internet telephone is possible for those who are distant from Tokyo.
We can also provide the packaged advising service all through the deal. (including locating an appropriate old house and a right builder to renovate
plus we can find your property manager). Fee for packaged advising service is 800,000 yen (plus tax) per deal.
If you are seriously interested in buying akitya (then converting into rental) , please contact us.
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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