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This time, it was distributed on CONSPIRIT's official channel on YOUTUBE.Episode 33: Boost your quality of life with real estate management!I would like to send you the contents.

I would like to explain one of the major topics in the income-generating real estate world this year: the news that owners of condominium and apartment buildings will be able to record repair reserve funds as losses.

The relationship between the problem of vacant rental properties and large-scale repairs

Among the owners for whom we have contracted management, there are cases where they are struggling financially and are no longer able to properly maintain their properties.
The problem of vacant rental properties and the problem of not being able to carry out large-scale repairs in a planned manner are actually fundamentally connected.

If repairs are not carried out properly, naturally leasing will not progress as expected.
A common pattern of declining profits is that rental occupancy rates gradually decline, creating a negative spiral.

As a result, most of the houses become vacant, which increases the risk of fire and could even become breeding grounds for crime, casting a shadow over the safety of the local area.

Reasons for the creation of the mutual aid system

There are several possible factors behind the problem of not being able to come up with the money for repairs, one of which is that the decision to save for repairs is left to the discretion of the owner.

To put it in a positive way, it is left up to individual discretion, but what it really means is that there are no rules or institutions in place, and no restrictions.

As you know, in the case of condominiums, the Condominium Act stipulates the collection of repair reserve funds, so it can be said that the management condition is likely to be maintained relatively well unless extraordinary circumstances occur.
In addition, repair reserves for condominiums can be recorded as expenses in your tax return.

On the other hand, as mentioned above, there are no restrictions on single-building properties, so there is a greater likelihood of variation in the management conditions for each property.
Furthermore, since this is a voluntary initiative, even if you have personally saved up funds for repairs, this will not be treated as a loss.

Given this trend, there has long been a demand for a system that would make it easier for building owners to save up for repair costs.

Then, in October 2021, the Ministry of Land, Infrastructure, Transport and Tourism granted business approval, and the mutual aid system, which allows building owners to save up repair funds, will start this year in 2022.

National Rental Housing Repair Mutual Aid Association

This mutual aid is operated by the National Rental Housing Repair Mutual Aid Cooperative.

・National Rental Management Business Association
・Japan Rental Housing Management Association
・National Federation of Rental Housing Managers Associations (Public Interest Incorporated Association)

It was launched by three organizations:

For the time being, they plan to recruit "agents" from management companies that are members of these three organizations and promote mutual aid enrollment through the agents. (*Conspi is also a member of the Japan Rental Housing Management Association.)

Details of the Mutual Aid Scheme

The biggest advantage of this mutual aid system is that repair reserves are treated as mutual aid premiums, which means they can be recognized as losses and recorded as expenses.

The maximum contribution amount has not yet been announced at the time of recording the video, but it is expected that participating owners will be required to save a fixed amount.

The areas that are subject to repair are limited to exterior walls and roofs, with plans to expand this to water supply and drainage pipes, air conditioning, and plumbing in the future.

Details have yet to be announced, but from what we know so far,

・Accumulation period is 10 to 50 years
You can choose to pay monthly or annually
・The reserve fund is paid when the repair work is carried out.
・The conditions for joining are that the building is made of wood and is less than 30 years old, and that the building is made of reinforced concrete and is less than 40 years old.
Both individuals and corporations can join

It is as follows.

It is essential to create a "long-term repair plan"

If this mutual aid scheme becomes widespread, I believe it will have a huge impact on the entire industry, but if there is one cause for concern, it is that in order to use the mutual aid scheme, it is necessary to create a "long-term repair plan."

It is rare for individual owners to voluntarily prepare "long-term repair plans."
When the system is launched, management companies, who act as agents, will need to cooperate fully and work in tandem with owners.

However, not all management companies have the know-how to create long-term maintenance plans, and I am personally concerned about whether the management industry, which is said to be chronically short-staffed, will be able to allocate the resources to creating such plans.

Nonetheless, there is no doubt that it is a groundbreaking system.
We hope that all building owners will keep an eye on future developments in the mutual aid system.

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