For anyone considering purchasing a condominium, the "Important Matters Explanation" (Jūyō Jikō Setsumei) before signing a contract is an absolutely critical process. While this explanation is provided by a licensed real estate transaction specialist, the technical terminology can be overwhelming for first-time buyers who may not know what to look for.
Having worked in the real estate industry for many years, I have seen firsthand how well a buyer understands the Important Matters Explanation directly affects their satisfaction after purchase. This article breaks down 13 key points to verify during the Important Matters Explanation, based on real condominium purchase transactions.
1. Basic Property Information
The first thing to verify is the property's official name, location, structure, and floor area. Confirm that this information matches what is recorded in the registered title deed (touki-bo tohon).
Regarding floor area in particular, there are two types: "wall-center area" (hekishin menseki) and "inner measurement area" (uchino ri menseki). The wall-center area is measured from the center of the walls and is the figure typically listed in brochures. The inner measurement area is measured from the inside of the walls and is what appears in the registry. Note that the taxable area for property tax may differ further, as it includes each unit's share of common areas.
2. Verification of Ownership and Mortgage Liens
Confirm through the title registry that the seller is the actual registered owner. If the seller originally purchased the property with a housing loan, there may be a mortgage lien on the property. In this case, the seller must arrange to have the lien removed before the handover date.
3. Zoning and Building Restrictions
Check the urban planning zone and use district classification for the land on which the property sits. In a neighborhood commercial zone, relatively large condominiums and commercial facilities may be permitted. The building-to-land ratio (kenpei ritsu) and floor-area ratio (yōseki ritsu) are important figures that will be relevant if the building is ever rebuilt in the future.
If a property has received a "unified site designation" (ichidanchi nintei), multiple buildings and land parcels are treated as a single entity. While this may grant relaxed road access requirements and floor-area ratio allowances, it also means that individual buildings cannot be rebuilt independently. This situation is relatively common in large condominium complexes.
4. Road Access and Road Classification
Check which directions the site faces and what type of road it abuts. The legal treatment under the Building Standards Act varies depending on the type of road. If the property faces a pedestrian-only road, vehicular access will not be possible. If it faces an urban planning road, be sure to check whether future road widening projects are planned.
5. Utilities (Water, Electricity, Gas)
Verify whether water is supplied by a public utility or a private system, whether gas is city gas or LP gas, and who provides electricity service.
For condominiums in particular, some buildings use a bulk electricity purchasing system (ikkatsu juuden). In such cases, individual residents cannot choose their own electricity provider and must contract with the designated supplier. Be sure to confirm the related procedures for after you move in.
6. Management Bylaws and Usage Restrictions
The management bylaws (kanri kiyaku) govern the most day-to-day aspects of condominium living. There are four main points to check.
Usage Restrictions
Private units are generally designated for use "exclusively as a residence." Office use, shared housing arrangements, and short-term rentals (minpaku) are almost always prohibited.
Pet Policy
Even in pet-friendly condominiums, there are restrictions on the type and size of animals allowed. For dogs and cats, size limits based on adult weight or dimensions are common. Registration and approval from the management association are typically required before keeping pets.
Flooring Regulations
If you plan to replace flooring during renovation, the bylaws will typically specify a minimum standard for lightweight impact sound insulation (LL rating). Providing this standard to your contractor will ensure any renovation complies with the management bylaws.
Noise and Musical Instrument Restrictions
Even when musical instruments are not outright banned, volumes that disturb neighbors are not permitted. In some cases, heavy items that affect the building's structure—such as a grand piano—may be prohibited.
7. Exclusive Use Rights
Certain parts of common areas may be designated for the exclusive use of a specific unit's owner. These typically include balconies, entrance doors, window frames, and window glass. If the unit has a rooftop balcony, a monthly usage fee is often charged, so factor this into your monthly costs.
Parking spaces and bicycle storage areas are not covered by exclusive use rights; instead, they are subject to individual contracts with the management association. The previous owner's usage rights cannot be transferred to you, so you will need to apply separately after taking possession.
8. Repair Reserve Fund and Management Fees
Check the monthly amounts for the repair reserve fund and management fees, as well as the total reserve balance for the entire condominium.
In recent years, many condominiums have been raising their repair reserve fund contributions to prepare for large-scale repairs 10 to 15 years down the line. A management association that actively maintains adequate reserves is a sign of sound management. If the reserve fund is too low, residents may be asked to make lump-sum contributions of hundreds of thousands of yen when major repairs become necessary.
Also verify whether there are any outstanding arrears in management fees or repair reserve fund payments. High levels of delinquency may indicate problems with the management association's operations.
9. Purchase Price and Earnest Money Deposit
Confirm the total purchase price and the amount of the earnest money deposit (tetsukekin). The earnest money deposit will be applied toward the purchase price but carries important implications if the contract needs to be cancelled.
The due date for the remaining balance (purchase price minus earnest money deposit) is also important, as it effectively serves as the final deadline for the handover.
10. Conditions for Contract Cancellation
This is one of the most critical sections for buyers. Make sure you understand exactly what types of cancellation are possible and under what conditions.
Earnest Money Cancellation
The buyer may cancel the contract by forfeiting the earnest money deposit; the seller may cancel by returning double the deposit amount. However, there is a deadline—typically a few weeks to one month after signing. A longer period may be set if the handover date is far off.
Cancellation Due to Mortgage Financing Clause
If the final mortgage approval is not granted, the contract can be cancelled without penalty and the earnest money deposit will be returned. Always confirm the deadline for exercising this clause.
Default Cancellation
If the contract is cancelled after the earnest money cancellation deadline has passed, and for reasons other than mortgage denial, a heavy penalty of 10–20% of the purchase price will apply. In practice, transactions between private individuals reaching this stage are rare, but buyers should understand this risk.
11. Important Notes Regarding the Mortgage
After your final mortgage approval, avoid taking on any new loans before the handover. Car loans, revolving credit arrangements, and even installment plans for mobile phones all count as debt obligations.
Financial institutions regularly check your credit status after approval, and a change in your financial situation could result in the approval being revoked. Maintaining the health condition required for group credit life insurance (danshin) is also essential.
12. Property Tax Proration
Property tax is levied on the owner of record as of January 1 for the entire year. At the time of sale, it is prorated on a daily basis using the handover date as the reference point.
If the handover takes place early in the year (around January through March), the tax amount for that year may not yet be finalized. In such cases, it is standard practice to use the previous year's tax amount as the basis for proration. Management fees and other ongoing charges are prorated in the same way.
13. Nearby Construction Plans and Hazard Maps
Check whether any construction projects are currently underway or planned in the vicinity of the property. New condominiums or commercial facilities nearby could affect sunlight, noise levels, and views.
Hazard maps are another important item to review. Check whether the property falls within a flood inundation risk zone, landslide risk zone, or tsunami risk zone, and identify the nearest evacuation shelter. Do not assume you are safe simply because the property is outside a flood risk zone—with increasingly extreme weather in recent years, advance preparation is essential.
Checklist: What to Bring on Signing Day
Finally, here is a summary of what you will need on the day you sign the contract.
- Identification document (driver's license, My Number card, etc.)
- Personal seal (a regular hanko is generally acceptable, but confirm in advance whether a registered seal is required)
- Revenue stamp (amount varies with the purchase price: ¥10,000 for properties between ¥10 million and ¥50 million; ¥30,000 for properties between ¥50 million and ¥100 million)
- Method for transferring the earnest money deposit (online banking, etc.)
- For joint ownership: co-owner's certificate of seal registration, power of attorney, and registered seal
Conclusion
The Important Matters Explanation is the most critical disclosure event in any real estate transaction. While the technical terminology may seem daunting, understanding each point one by one will give you the confidence to make an informed purchase decision.
At INA&Associates Co., Ltd., we believe that eliminating information asymmetry in real estate transactions is paramount. We are convinced that when the same information is shared, the same conclusions can be reached. If you are considering purchasing a condominium, we encourage you to use this article as a guide and ask questions freely during your Important Matters Explanation.
Frequently Asked Questions (FAQ)
Q. When does the Important Matters Explanation take place?
It takes place before the sales contract is signed. By law, it must be conducted in person or online by a licensed real estate transaction specialist. Rather than hearing it for the first time on the day of the contract, we recommend requesting the written materials in advance so you can review them beforehand.
Q. Are increases to the repair reserve fund unavoidable?
Since buildings deteriorate over time, large-scale repairs are unavoidable. A management association that proactively revises its reserve fund contributions is actually a sign of good management. There are two approaches—stepped increase plans and fixed amount plans—so be sure to review which method your condominium uses.
Q. What should I be careful about after my final mortgage approval?
Avoid taking on new debt (car loans, revolving credit, mobile phone installment plans, etc.), avoid changing or leaving your job, and maintain your health. Financial institutions regularly check credit information right up until the loan is disbursed.
