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Due Diligence—10 Things to Check Before Buying a New Home

Due diligence, Japan

Before buying your new home in Japan, there are certain things that you need to check out. Due to language barriers and differences in disclosure requirements between your home country and Japan, it is advisable to use your bilingual real estate agent to gather information and field questions for you. In addition to the physical structure of the building itself, there are a number of concerns and possible risks stemming from Japan’s unique geography—earthquakes, tsunami, etc.

Please note that this is not an exhaustive list. The questions you need to ask will depend on the type of property you buy and want you would like to do with it.

  1. Check out the neighborhood yourself. Take a walk around at different times of the day and night. Time the walk to the schools, stations, and major shopping areas. Know where the bus stop is in relation to your house.
  1. If you may want to resell in the near future, check out property and rental values of similar neighboring buildings. Since a lot of this information may not be publicly available, your real estate agent will be your best source of information.
  1. Are there any visible defects in the foundations, walls, windows, etc.?
  1. If you are buying a condominium, you should:
    1. Check out the reputation and financial status of the management company (kanri kumiai).
    2. Get a copy of the bylaws (kanri kiyaku) for the condo’s homeowner’s association which is responsible for the building’s common areas and general governance.
    3. Ask whether there are any use restrictions—especially if you plan to operate a business or an airbnb from the condo.
    4. Get minutes of meetings from the past few years of the homeowner’s meetings and board of directors to see what issues are likely to crop up in the near future.
    5. Get a copy of the long-term capital expense plan (shouki keikakusho) to see what ongoing capital expense obligations are binding on owners; check on the amount of reserves to make sure they are sufficient in light of expected future capital expenditures; confirm the likelihood of any large maintenance or renovation projects that might increase your monthly condo fees.
    6. Are parking spaces revenue-generating?
  1. Know the earthquake risks for your area. A good tip-off is whether your purchase price is lower than other similar nearby properties. If so, it could mean that your property is located right on fault lines. The website at http://www.j-shis.bosai.go.jp/en/ provides detailed seismic-hazard maps of Japan in English.  The website will show where major earthquakes have occurred within the past 30 and 50 years based on city or train station names.
  2. Property located near water sources may be prone to flooding, especially during rainy season. A first clue may be the name of the neighborhood which will refer to water or a plant or animal in a water-habitat in some form; for example, tani (valley) or mizo (ditch), kawa (river), numa (marsh), hasu (lotus), sagi (heron), kame (turtle), hashi (bridge), or hori (canal). Your real estate agent can help you determine whether your property is in a high-risk flooding area.
  3. On a similar issue, check to see whether your area is prone to mudslides. This is especially important if your property is near a deforested mountain or partially built into a hillside.
  4. Ask your real estate agent about the zoning category of your property to see what other kinds of buildings or uses are possible around your property. Among these categories are dai-isshu teiso jutaku senyo chiiki (residential districts exclusively for low-rise houses and apartments, small shops and schools) and jun-jukyo chiiki (quasi-residential districts zoned for anything from houses to offices to pachinko parlors and karaoke boxes).
  5. If you are buying an older home that you may want to renovate or remodel later, ask your real estate agent about the Kenpei-ritsu (building-land ratio). This is the ratio of the permitted building’s area within the land area. For example, if the kenpei-ritsu for your land which is 100 sq. meters, is set at 60 percent, your house can only occupy up to 60 sq. meters on the plot.
  6. A related concept to the above is the yoseki-ritsu (floor-area ratio), or the total permitted floor space you can have. If your 100-sq.-meter plot’s yoseki-ritsu is 150 percent, and if you want to make an addition, including adding a new story, your combined floor space cannot exceed 150 sq. meters.

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