In real estate investment, a property without a completion certificate (kensa-zumisho) is a high-risk purchase. This article explains why such properties should be avoided and the hidden risks in real estate investment that you must know.
What Is a Completion Certificate?
A completion certificate is a document issued by a government agency or designated inspection body confirming that a newly built or renovated structure has been constructed in conformance with the approved building permit. It is evidence that the building complies with the Building Standards Act.
Why Are Properties Without Completion Certificates Risky?
1. Possibility of Illegal Construction
A building without a completion certificate may have been constructed or modified without proper approval. An illegally constructed building may face orders to restore it to its original condition, meaning the structure you purchased cannot legally be occupied or used as-is.
2. Difficulty Getting Financing
Most financial institutions will not provide mortgage loans for buildings without completion certificates. This significantly limits your financing options and also reduces liquidity at the time of sale.
3. Obstacles When Selling
When selling, the buyer's financing is also restricted, dramatically narrowing your pool of buyers. The property may only be sold to a cash buyer at a significant discount.
4. Insurance Difficulties
Non-conforming buildings may be excluded from earthquake insurance and some fire insurance policies, making it impossible to protect your assets against disasters.
How to Check for a Completion Certificate
When purchasing a property, always confirm whether a completion certificate has been issued. The main methods are:
- Request the certificate from the seller or real estate company
- Check building records at the municipal office (building permit application records are generally publicly accessible)
- If the certificate is lost, request a confirmation from the building guidance department of the municipal office
What to Do with Properties Built Without Completion Certificates
If the target property does not have a completion certificate, consider the following:
- Hire an architect to assess whether bringing the structure into compliance is possible and what it would cost
- Have the property evaluated to confirm it actually complies with current building standards
- If compliance is difficult or costly, reconsider the purchase
Related Reading
- Using Second Opinions to Avoid Risk in Real Estate Investment
- Is Difficulty in Real Estate Investment Due to Insufficient Comprehensive Skills?
Frequently Asked Questions (FAQ)
Q. Is a property without a completion certificate always illegal construction?
Not necessarily. The completion certificate may have been lost or not issued due to administrative reasons even though construction was conducted properly. However, since there is no way to confirm compliance with the Building Standards Act without it, the risk remains high.
Q. Is it possible to obtain a completion certificate retroactively?
No. A completion certificate can only be issued immediately after construction is completed. However, it is possible to obtain a "building record confirmation" from the municipal office to confirm that the building permit was filed and construction was completed.
Q. Why are some properties sold without a completion certificate?
Completion certificates were sometimes not issued in older constructions, or the certificate was lost. Also, in cases of unauthorized construction or extensions without permits, certificates are never issued in the first place.
