Elderly Residents with “Unsellable” 60-Year-Old Condominium for Sale End Up
The leasehold of a luxury condominium built in 1967 is expiring with four years remaining. The residents are hoping to renew the lease, but .....
I was planning to sell this apartment before I could no longer live on my own and use it as part of the funds to move into a nursing home,” he said. But it looks like that won’t happen…”
Ms. Keiko Sakuma (pseudonym), who is 80 years old this year, carefully bundles her silver hair.
The house is located in an educational area in Tokyo’s 23 wards. The 56-year-old condominium, which stands just inside the Yamanote Line, has a simple exterior, but its thick exterior and interior walls suggest that it is a stately structure. Currently, 30 households reside in the building, a third of whom, like Mr. Sakuma, have lived there since it was built, including some elderly residents of the first generation in the Showa era. Mr. Sakuma says, “The Tokyo Metropolitan Electric Railway runs right in front of the house.
The Tokyo Metropolitan Electric Railway runs right in front of the house and goes to Sukiyabashi in Ginza, so transportation was very convenient. Moreover, there are many national universities and prestigious junior and senior high schools in this area. But the area right next to the schools is much more expensive. But since it is about a 10-minute walk here, it was a little cheaper than the market price. So the only people who purchased the property were young couples who wanted to send their children to these schools.”
In 1967, Mr. Sakuma purchased a 41-square meter room in this condominium for 4.93 million yen. The average salaryman’s annual income at that time was 430,000 yen, indicating that it was quite an expensive property. However, the owner of the land is the construction company that executed the condominium, and the residents are still paying approximately 5,000 yen per month (household average) in land rent.
Currently, a room in this condominium is for sale: a 43-square-meter, one-bedroom apartment for approximately 25 million yen. The property description reads, “Land lease period – until March 2025, monthly rent 4,220 yen. A real estate agent acting as an intermediary said, “I think it’s a very aggressive price.
The real estate agent who acted as an intermediary said, “I think the price is quite aggressive. But to be honest, it will be difficult to sell even if the price is lowered.
Why is it so difficult to sell? In fact, there are many problems with this condominium.
One is that the land is leased, and the 60-year lease expires in March 2025. However, the residents all want to renew the contract. The landowner, in response to our inquiry, said, ‘I will accept the renewal. However, the renewal discussion is scheduled to start in April 2024, and to be honest, we are not sure what will happen.
Mr. Sakuma also seemed quite concerned about the situation.
Mr. Sakuma was also quite concerned about the situation. “Actually, there has been talk of redevelopment in this area since last year,” he said. This area has been undergoing redevelopment for several years, radiating out from the Yamanote Line. The developer is planning to rebuild the area that includes this condominium into a high-rise condominium. From the landowner’s point of view, there is a huge profit to be made by selling the land rather than renewing it and receiving land rent. So we are trembling with fear that they will sell the land without renewing it,” said Sakuma.
Another problem is that the management structure is “self-management.
Generally, the management association of a condominium is outsourced to a management company, which performs various tasks on its behalf. For example, discussions regarding the extension of a land lease contract, as well as financial long-term plans and issues such as management fees and reserve funds for large-scale repairs are discussed and decided with residents. However, this condominium has been ‘self-managed’ since 1967. Therefore, there are doubts as to whether they have done the repair work properly. It is quite dilapidated by the looks of it, and in order to continue to live in it for a long time to come, large-scale repair work may be necessary” (see above, real estate company).
We spoke with the president of the current management association of the condominium about this issue.
He said, “Actually, about three years ago, we had to replace the sewage pipes in our condominium because they had deteriorated. When we made an estimate, the cost was 30 million yen. However, the management association’s pooled funds alone were about 10 million yen short, so we asked the landlord, who owns the building from the first floor tenant to the second basement floor, for some help. However, they said, ‘We are not obligated to assume building repairs,’ so we ended up collecting 300,000 yen (per unit on average) each from the residents and managed to do the total replacement work on the residential portion.”
There were other problems as well.
Last year, the landowner asked us if we would be willing to pay for an earthquake-resistance assessment. The road in front of the condominium is designated as a general emergency transportation road, so it is true that the condominium is required to undergo an earthquake-resistance diagnosis. When we agreed to pay the cost, the results showed that it would cost 300 million yen for reinforcement work to meet the earthquake resistance standards. We can’t raise that kind of money right away.
Mr. Kazuhiko Tanaka, a long-time consultant on the effective use of real estate and author of articles for a website specializing in real estate, explains these problems as follows.
However, if the building on the leased land has exceeded its legal life, the residents are obliged to dismantle the condominium at their own expense and return the land to the landowner. If the building has exceeded its legal useful life, the residents are obliged to dismantle the condominium at their own expense and return the land to the landlord. On the other hand, if the residents wish to renew their leasehold, the landowner must do so unless there are valid reasons for refusing to renew. However, in the case of this property, in order to renew and continue to live in it, it must be reinforced against earthquakes. Since the residents are unable to raise the cost of such reinforcement, the landowner can then refuse to renew the lease with a justifiable reason, saying, ‘If you cannot afford the seismic reinforcement, then you cannot renew the lease agreement. In extreme cases, the landlord can say, ‘We will bear the cost of demolition, so we want you to move out as soon as possible.
Even if the lease were to be renewed, the owner would have to spend nearly 300 million yen to reinforce the building against earthquakes in order to continue to live in it. Mr. Sakuma muttered as if he had given up.
I have lived here for nearly 60 years. The residents get along well with each other, and there has never been any trouble. But I never expected this to happen at the end…”
Since around 1972, when the baby boom began, condominiums like this one were built and sold in large numbers, and the number of condominiums reaching the expiration of their 60-year fixed-term leaseholds is expected to increase one after another in the future. The problem of these condominiums is truly not a personal one.