Revision to voting ratios to make it easier to sell apartment building and land

Hanshin earthquake
An apartment building damaged in the 1995 Great Hanshin Earthquake.

On December 24, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) announced a revision to the Facilitation of Reconstruction of Condominiums Act which is intended to make it easier to sell off an older apartment building and land in order to speed up redevelopment.

Under the revision, the voting ratio to sell off the building and land will be reduced to 80% for kyu-taishin apartments that do not meet earthquake-resistant codes (the ratio was originally 100%). It is important to note that this revision does not apply to all apartments built before 1981. It only applies to those that failed an earthquake-resistant inspection.

At the end of 2013, there were 6,010,000 apartments across Japan. Of those, approximately 17% are in buildings built to the older earthquake codes (called kyu-taishin). The figures are higher for condominiums, with a third of condominium apartment buildings across Japan built to the older codes.

By April 2014, there were only 196 cases where kyu-taishin apartment buildings were redeveloped, accounting for just 1.4% of the total number of kyu-taishin apartments.

A survey in September 2014 found that 2,000 apartment buildings in Tokyo’s 23 wards had carried out earthquake-resistant inspections with assistance from local governments. Of those, 80% did not meet current earthquake-resistant standards, yet only 10% of those had carried out any kind of reinforcing or repairs. The buildings inspected were built between 1957 ~ 1982 and ranged in height from 2 ~ 17 stories.

In the past, a 75% vote in favour was required to carry out earthquake-reinforcing repairs. In May 2013, the law was revised to reduce this down to a majority vote. Nevertheless, progress has been delayed by high costs and difficulty in getting apartment owners to agree to repairs. While an inspection may cost several million Yen, repairs can cost tens to hundreds of millions of Yen.

To meet current codes, a building must be able to withstand (eg. not collapse) an earthquake producing a  level of 6+. The level of earthquake-resistance is indicated by an Is number. If the Is number is below 0.6, reinforcement and repairs are necessary. The Shibuya City Office and Public Hall buildings ( built in 1964) are being redeveloped after it was discovered that their Is index was just 0.23 (anything under 0.3 poses a high risk of collapse in a shindo 6 ~ 7 earthquake).

With concerns about future earthquakes in populated areas, there is a growing urgency to redevelop unsafe buildings.

The process:

  • Owners association to agree to investigate either earthquake-retrofitting, redevelopment or sale
  • Establishment of committee
  • Selection of consultant or expert advisor
  • Find prospective buyer
  • Owners association to obtain official certification that the building does not meet earthquake codes
  • Buyer to inform local government of intent to acquire property
  • Vote by apartment owners (80% must be in favour)
  • Owners association to enter into sale agreement with buyer

What about those who don’t agree to the sale?

If some apartment owners do not agree to the sale, the owners association can demand that they sell the apartment rights to the association at market price.

Sources:
MLIT, December 24, 2014.
The Asahi Shimbun, September 22, 2014.

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