In condominium investment and sectional ownership, fixed costs such as management fees and repair reserve funds continue even after the mortgage has been fully repaid. The level of management fees is directly tied to the asset value of the property, and the simple assumption that “lower is better” can lead to poor investment decisions. In this article, we explain the structure of management fees, typical price levels, the difference from repair reserve funds, and delinquency risks from an investor and owner perspective.
What is the full picture of ongoing costs in condominium ownership?
Once you own a condominium, the following maintenance costs continue on an ongoing basis.
| Cost item | Typical monthly amount | Notes |
|---|---|---|
| Management fee | 15,000 to 20,000 yen | Tends to rise year by year |
| Repair reserve fund | 10,000 to 15,000 yen | Increases as the building ages |
| Parking fee | 5,000 to 30,000 yen (50,000 to 80,000 yen in central urban areas) | Depends on area and facilities |
| Fire and earthquake insurance | (50,000 to 100,000 yen for a 10-year payment) | Depends on coverage details |
| Fixed asset tax and city planning tax | 100,000 to 150,000 yen per year (newly built property in Tokyo) | Varies by assessed value |
Over 30 years, management fees and repair reserve funds alone may total 9.0 million to 12.6 million yen (or 12.15 million to 18.2 million yen including parking, taxes, and insurance).
What are condominium management fees? How are they different from repair reserve funds?
Management fees are costs used for the day-to-day maintenance and management of common areas. They include cleaning hallways, elevators, entrances, and parking areas; purchasing supplies; equipment maintenance; fire insurance premiums; and utility costs such as water and electricity. A large portion is typically used as outsourcing fees paid to the management company.
In contrast, a repair reserve fund is money set aside for large-scale repairs. It is used for items such as exterior repainting, elevator replacement, and bicycle parking repairs, and its use is limited under the Ministry of Land, Infrastructure, Transport and Tourism’s “Standard Condominium Management Bylaws.”
What is the typical level of management fees?
In a typical condominium, management fees average about 16,000 yen per unit per month, although this varies by scale.
- Small condominiums with 20 units or fewer: about 19,000 yen per month
- Large condominiums with 500 units or more: about 15,000 yen per month (lower due to economies of scale)
Condominiums with on-site concierge service and high-spec facilities tend to be even more expensive.
Why lower management fees are not always better
Insufficient management can reduce livability
Lower management fees mean less money available for management. That can lead to delayed equipment updates, the absence of on-site management staff, lower security, and inadequate cleaning of common areas, all of which reduce resident satisfaction.
Asset value is more likely to decline
As investors often say, when buying a condominium, you are buying the management. The quality of management is directly linked to real estate value. A condominium that is not properly maintained deteriorates more quickly, making it difficult to sell at a high price. When investing in sectional ownership properties, confirming the management standard is essential.
What to do if management fee payments become difficult
- Refinance with a financial institution offering a lower interest rate (refinancing into a fixed-rate loan provides more stability)
- Propose changing the management company to the owners’ association (raise it as an agenda item during a price revision briefing)
- Switch to a nearby monthly parking space (it may be less expensive than parking within the property)
- Consult an FP (financial planner) to optimize your income and expense balance
- Make early repayments on your mortgage or refinance to reduce the total repayment amount
What happens if management fees go unpaid? Risks owners should understand
According to the Ministry of Land, Infrastructure, Transport and Tourism’s “2018 Comprehensive Condominium Survey Results,” about 25% of units are delinquent for three months or longer on management fees and repair reserve fund payments. If delinquency continues, the following risks can arise.
- Phone reminders and formal demand letters from the management company
- Your name being disclosed at the owners’ association board meeting
- Late payment charges added (14.6% annual interest at many condominiums)
- The possibility of a forced sale through auction (serious delinquent owners may face litigation and auction)
Related reading
Frequently asked questions (FAQ)
Q. Will management fees and repair reserve funds increase in the future?
Repair reserve funds are often increased as a building ages, and they may rise further as major repair work approaches. Management fees also face the risk of increases due to broader economic conditions and rising labor costs.
Q. What are the one-time “management preparation fee” and “repair reserve fund contribution” paid when buying a newly built condominium?
The management preparation fee is a one-time payment to help condominium management start smoothly, while the repair reserve fund contribution is an initial reserve set aside for large-scale repairs. Because neither is refundable, both need to be included in your purchase funding plan.
Q. If a condominium’s management fee is higher than the market average, how should that be evaluated?
Compare it with management fees at nearby condominiums of similar size and in the same area, and confirm whether the management content, such as concierge services and facilities, is commensurate with the cost. The key is whether the expense matches the service level.
Q. If one unit owner is delinquent on management fees, does that affect other owners?
If the number of delinquent owners increases, repairs may no longer be carried out according to plan, management standards may decline, and management fees may ultimately rise. Those effects extend to the other owners as well.
