When purchasing a condominium, it is easy to forget about the "management fee" and "repair reserve fund," which must be paid monthly.
Monthly fees such as management fees are fixed monthly expenses, just like a mortgage.
Therefore, they should be well understood when considering the purchase of a condominium.
In this article, we will explain the purpose, usage, and market prices of the management fee and repair reserve fund for condominiums.

What is a building management fee? What is it used for?

First, let's look at what a "Building management fee" is.
The building management fee is money used for daily maintenance, management, and repairs.
To ensure comfortable living and to maintain the property's asset value, management fees are used to clean entrances and common corridors, maintain elevators, and maintain water supply and drainage facilities.
Personnel and operating costs of the management association are also paid from the management fee, and some condominiums include utility costs for common areas, earthquake insurance premiums, and fire insurance premiums.
In addition to condominiums for sale, most rental condominiums also pay a monthly management fee.
Since it must be paid separately from the mortgage repayment, it is important to understand the amount and other details in advance when purchasing a condominium.

The Many Uses of the Building Management Fee

● Personnel costs of the management association
● Operating costs of the management association
● Operating and maintaining the common area facilities (including utility fees for the common areas)
● Minor repairs and replacement of minor items such as lightbulbs
● Fire and earthquake premiums and other liability insurance for the common areas.

How Building Management Fees are set

Management fees are not capped by law.
Therefore, the amount varies from condominium to condominium.
Although the management fee is considered to be an expense to maintain and manage the building, the actual cost is not calculated in detail and the amount is often determined by the management company.
In the case of condominiums for sale, the management fee is determined according to the number of units occupied, the level of the building, and the common facilities.

What is a Repair Reserve Fund fee? What is it used for?

Next, let's take a look at the "repair reserve fund."
The repair reserve fund is money set aside for large-scale repairs to condominiums.
It is used for special upkeep, management, and repairs such as large-scale repairs and maintenance based on a long-term repair plan, including large-scale remodeling of common areas and construction to improve earthquake resistance.
Since large-scale repairs can amount to several million yen, a fixed amount of money is collected monthly from the unit owners to accumulate a long-term repair reserve fund over a period of 10 to 15 years.
Like management fees, these funds are used to ensure and improve the living environment of condominiums, and are sometimes used to cover damage to buildings and facilities caused by natural disasters or accidents, or to deal with problems between unit owners.

The many uses of a Repair Reserve Fund

●Planned repairs at certain periodic intervals (e.g., renovation of exterior walls, roofs, and rooftops)
●Repairs required due to natural disasters, unforeseen accidents, or special reasons
●Costs for surveys necessary for building reconstruction, etc.
●Changes to the site and common areas, etc. (e.g., remodeling of common areas)
●Expenses that are specifically necessary for the benefit of the unit owners as a whole

How Repair Reserve Fund Fees are set

The repair reserve fund is generally determined by the long-term repair plan prepared by the management association.
The necessary work to maintain comfortable living, asset value, and performance of the condominium is considered from a long-term perspective, and the cost for such work is collected and accumulated monthly from the unit owners (or tenants).
The amount of the reserve for repairs varies depending on the size and age of the condominium and the grade of common facilities, and does not remain unchanged over time.
The amount will be reviewed in accordance with the details of repairs as discussed by the management association.

What is the standard market price of building management fees and repair reserve fund fees?

So far, we have introduced the usage and purpose of the management fee and repair reserve fund for condominiums.
Then, how much is the actual market price?
Since the management fee and repair reserve fund are fixed expenditures, it is important to grasp them as separate expenditures from the mortgage.

The market price of building management fees

The management fee is set differently for each property, depending on the size and age of the condominium, the grade of common facilities, and the services provided.
Generally, the amount is set by calculating the amount according to the ratio of equity (size of exclusive use area) and whether or not there is an exclusive use area.
According to the Ministry of Land, Infrastructure, Transport and Tourism's "Comprehensive Survey of Condominiums in Fiscal 2008," the overall average of management fees was announced as "approximately 217 yen per square meter."
The overall average of the monthly management fee for the equivalent of 70 square meters of exclusive area is "approximately 15,190 yen."
In addition, the management fee may increase in the future when the management company of the condominium is changed, or when the management or services are changed and revisions are necessary.
In principle, revisions to the management fee and other fees are decided by an ordinary resolution of the general meeting.

The market price of the repair reserve fund

The repair reserve is set based on the "long-term repair plan" prepared by the management association.
The long-term repair plan is designed to maintain the performance of condominiums by repairing exterior walls, waterproofing rooftops, maintaining water supply and drainage facilities, and improving windows and entrance doors, etc. The plan is for a period of 30 years or more for new condominiums and 25 years or more for existing condominiums.
According to the Ministry of Land, Infrastructure, Transport and Tourism's "Comprehensive Survey of Condominiums in Fiscal 2008," the overall average of the reserve for repairs was announced as "approximately 201 yen per square meter."
The monthly repair reserve for the equivalent of 70 m2 of exclusive area is "approximately 14,070 yen."
In addition, by the time the second or third large-scale repair work is due, the construction cost may be insufficient.
In such cases, the repair reserve fund may be raised or the shortfall may be collected as a lump-sum payment.
Since large-scale repair work is an important part of maintaining the asset value of condominiums for a long time, it is necessary for the management association to review the work on a regular basis.

Is it better for a condo to have cheap building management and repair reserve fund fees?

Condominiums have advantages such as being easier to manage and having better security.
Such advantages are supported by the management fee and the repair reserve fund.
Although it is nice to have low monthly expenses, the management fee and repair reserve fund of a condominium are proportional to the services provided.
It is advisable to check whether the services you seek are balanced with the management fee and repair reserve fund, rather than thinking that the cheaper the better.

Will building management fees and repair reserve fund fees get raised in the future?

When purchasing a condominium, it is a matter of concern whether the management fee and the reserve fund for repairs will be raised in the future.
Revisions to the management fee and the reserve fund for repairs are described in the "Investigation Report on Important Matters."
The "Investigation Report on Important Matters" is a document that contains detailed information on the history, condition, and schedule of repairs to the condominium, the total amount of the repair reserve fund, and whether or not the management association has borrowings.
If there are any plans to revise the management fee or the repair reserve fund, be sure to check the Important Matters Investigation Report.
The status of the management fee and reserve fund for repairs is one of the factors that determine whether the condominium is being managed and operated smoothly.
If you are concerned about whether the fees will be raised in the future, ask for the minutes of the general meeting for the past one or two years and check them to be sure.

In Conclusion

Regular maintenance ensures that condominiums maintain their asset value.
Management fees are used for daily management, repairs, and administrative operations, while the repair reserve fund is used for large-scale repair work and renovation.
When considering the purchase of a condominium, be aware that appropriate costs will be incurred, understand the purpose, usage, and market price of the management fee and repair reserve fund, and consider whether the amount can be paid on an ongoing basis.