Japan Weighs Proxy Condo Management for Owners Abroad

Legal revision aims to encourage improvements to aging properties

The Japanese government is considering setting up a proxy condominium management system for overseas owners. Under the proposed system, proxies will have the authority to make decisions concerning the management of the condos on behalf of absentee owners. They will be able to decide, for instance, to allow builders entry into condo units for repair work, even if the owner is absent.

The government wants to make it easier to repair aging condos, the number of which is growing in Japan. The proxy management system aims to simplify procedures for conducting large-scale repair work involving many units, which, under current rules, is complicated by legal and other obstacles.

The proposal will be discussed at the Legislative Council, an advisory body to the justice minister, with the aim of amending the condominium unit ownership law next year. The revision is a response to problems linked to the growing number of foreign condo owners, and Japanese owners moving abroad for work or other reasons.

Absentee owners and difficulty in communicating with those who live abroad often create obstacles to major condo repairs and maintenance. There have been growing calls to create legal procedures for such situations.

At present, condo owners can individually appoint an agent under a delegation contract. But because it is not clear what actions such agents can legally take, confirmation from the overseas owner is required in many cases. This raises concerns that problems with communication can undermine the management of an entire condominium complex.

This presents serious problems when a condo's aging pipes or wiring requires renovation beyond common areas and must be done on privately owned units. The planned revision to the law would give owner proxies the authority to let workers to enter privately owned areas to perform necessary work.

The proxy management system would also be beneficial for overseas condo owners, as it would save them time and trouble in managing their properties. The government will also consider adding a provision to allow proxies in Japan to pay maintenance fees on behalf of owners.

According to CBRE, a commercial real estate service provider, overseas investors accounted for 30% of real estate investment in Japan in 2021. That share could rise further, as 74% of foreign investors said they planned to spend more on acquisitions in Japan in 2022 than in the previous year, according to a survey conducted in December 2021 by CBRE.

"In addition to low financing costs, real estate liquidity is high compared to other countries and regions in the Asia-Pacific region," the report said. The number of Japanese business people living abroad temporarily is also expected to rise as more Japanese companies expand their operations overseas.

According to a survey by the Ministry of Land, Infrastructure, Transport and Tourism, there were 2.49 million condominiums nationwide over 30 years old as of the end of 2021. The ministry predicts the number will jump 140% to 5.88 million in 20 years. Repair work is vital to maintain the value of an aging condominium.

As part of the legislative initiative to revise the condominium unit ownership law, the government will also consider a new set of procedures for dealing with management problems arising from a lack of information on the owner's whereabouts. The revision would make it possible for the court to appoint a representative for the owner so that experts such as lawyers, judicial scriveners, and licensed strata management consultants and experts in condo management can handle privately owned areas on behalf of the owners.

The system is designed to deal with cases where problems caused by poor maintenance and management, such as water leaks or unattended garbage adversely affect other residents.