The property management business refers to all services that are commissioned by owners (lessors of real estate) to properly maintain and operate their rental real estate. Its scope must be understood in terms of both legal definition and practical role. This article explains the legal definition of property management business under the Building Lots and Buildings Transaction Business Law and the Rental Housing Management Business Law, and describes the practical details and the importance of legal compliance. The article will also discuss INA&Associates' efforts to respond to the regional characteristics of the Tokyo metropolitan area and the Kansai region, where INA&Associates is based, and to promote DX (Digital Transformation) and human capital investment for sustainable growth, to provide an overall picture of the property management industry.
First, the relevant laws and regulations are essential to understanding the property management business. The Building Lots and Buildings Transaction Business Law (Takken Business Law) and the Rental Housing Management Business Law are the two major laws that companies involved in the property management business must comply with.
Positioning under the Building Lots and Buildings Transaction Business Law: The act of mediating or acting as an agent for a real estate lease contract falls under the category of "real estate transaction business" as defined by the Building Lots and Buildings Transaction Business Law. In other words, a real estate brokerage license based on the Building Lots and Buildings Transaction Business Law is required to engage in the business of soliciting tenants for rental properties and brokering contracts. The business of connecting owners of rental properties with prospective tenants is a type of real estate transaction, and the law establishes strict rules for obtaining a license and the obligation to explain important matters.
Definition under the Rental Housing Management Business Law: The Rental Housing Management Business Law is a new law that went into full effect in 2021, and establishes standards for the proper conduct of the property management business itself. The term "rental housing management business" as used in this law refers to businesses that are commissioned by the lessor of rental housing to perform maintenance and preservation services such as property inspections and cleaning, as well as financial management services such as rent, security deposits, and common service fees. In short, the "rental housing management business" is defined as a series of services that maintain and manage buildings and manage rent and other expenses on behalf of owners.
Based on the Rental Housing Management Business Law, management companies above a certain size are required to register with the Minister of Land, Infrastructure, Transport and Tourism. In particular, registration is mandatory for those managing 200 or more units, and various rules are imposed to ensure proper operations. The following are some of the main points that must be complied with by law
Assignment of business managers: At least one business manager with a certain level of knowledge, experience, and qualifications in rental management must be assigned to every sales office. The business administrator must be selected from among persons who meet the prescribed qualifications and experience requirements, such as certified real estate transaction agents and certified rental property managers, and must be responsible for supervising the management operations.
Thorough explanation of important matters: Before concluding a management contract with the owner, the company is obligated to provide a written explanation of important matters such as management details, implementation methods, and compensation. (In recent years, it has become possible to explain important matters online and deliver documents electronically through the use of information technology.)
Segregation of money: The rent, security deposit, and other funds entrusted to us must be clearly segregated from the company's own funds. As a trustee of the owner's valuable assets, we will ensure transparency by keeping the accounting records separate from the company's own funds.
Periodic Reporting Obligation: The company must report to the owner on a regular basis on the status of its management operations. By providing regular reports on property occupancy, income and expenses, and issues that have been addressed, owners can rest assured that their assets are in good hands.
Other Compliance: There are detailed rules on ethics and responsibilities to be observed as a management contractor, such as the prohibition of lending a name to an unlicensed contractor, confidentiality of privacy information obtained in the course of business, and posting of signs at the business office. Compliance with these rules will maintain the reliability of the property management company and the soundness of the industry.
As described above, from a legal perspective, the property management industry has a strict framework and is required to operate under official control through the acquisition of a building contractor license and registration as a rental housing management business. Compliance with laws and regulations is an unavoidable responsibility for property management companies, and this is how they protect the interests of both owners and tenants and improve the quality of their services.
Now that we have a legal definition, let's take a look at what the actual property manager does. Property management services vary widely, but can be broadly categorized into the following areas: contract management, tenant relations, building maintenance, and accounting management.
Contract management: The property manager handles all procedures related to the lease contract on behalf of the tenant. Specifically, we prepare and execute contracts when new tenants move in, renew contracts, and settle accounts and return security deposits when tenants terminate (move out). During the contract period, we manage the status of contract compliance and notify both owners and tenants when the renewal period is approaching to ensure smooth renewal. Proper contract management prevents any omissions from the contract and supports the owner's stable rental management.
Tenant Relations: We handle routine inquiries, consultations, and troubleshooting from current tenants. For example, we promptly respond to complaints such as "equipment is defective" or "there is a noise problem with the neighbors," and carry out repairs or mediation as necessary. Many management companies have established a 24-hour contact system to serve as a point of contact with tenants, and we strive to improve tenant satisfaction. We also provide support throughout the entire lifecycle from move-in to move-out by attending to tenants when they vacate, arranging for restoration work, and settling security deposits.
Building Maintenance and Inspections: To maintain the asset value of rental properties (buildings) and to keep the environment safe for tenants, we perform periodic building inspections, cleaning, and maintenance of facilities. Specifically, we perform a wide range of building management tasks, including periodic cleaning and patrols of common areas, statutory inspections of elevators and water supply and drainage facilities, management of lighting and firefighting equipment, troubleshooting of air conditioners and hot water heaters, pest control, and plant management. We also place orders with and attend to specialist contractors as needed, and in some cases advise owners on planning for large-scale repairs. By ensuring thorough building maintenance and management, we are able to maintain long-term asset value and increase tenant satisfaction.
Accounting Management (Cash Management): We properly manage the flow of money related to rental management. We collect monthly rent and common-area maintenance fees on behalf of our tenants, remind tenants when they fall into arrears, and process remittances to the owners. We also prepare income/expense reports for managed properties, clearly showing income from rent income minus necessary expenses such as management fees, repair costs, and taxes. At the end of the fiscal year, some management companies provide support for the preparation of documents for tax returns, reducing the owner's cumbersome accounting burden. Furthermore, accounting management also includes the management of security deposits received from tenants, settlements when tenants move out, and payment of fire insurance premiums on behalf of the owner. It is an important mission of property managers to earn the trust of owners through proper cash management.
As described above, by taking care of all aspects of rental management on behalf of owners, property managers provide owners with management efficiency and peace of mind, and tenants with a comfortable living environment and prompt service. The real estate management business is made possible by the organic coordination of the areas of contracts, tenants, buildings, and accounting.
Compliance with the aforementioned laws and systems is not only an obligation, but also an important element that supports the credibility of the property management business. Let us reiterate the significance of the real estate building business license and theregistration system for the rental housing management business.
First, the Building Lots and Buildings Transaction Business License (宅 建業免許 ) is the basic permit for a business to engage in real estate transactions. Even a rental property management company must obtain a license as a real estate trader as long as it solicits tenants and acts as an agent or mediator for lease contracts. In order to obtain and maintain a license, there is an examination by the prefectural governor or the Minister of Land, Infrastructure, Transport and Tourism, and the following conditions must be met: no disqualification requirements, deposit of a business guarantee (or deposit money), and the establishment of a real estate transaction specialist for each office (obligation to assign at least one real estate transaction specialist per five employees). Having a license is proof that you are a "legitimate real estate agent that meets the standards set by law," and gives owners and tenants a sense of security. Furthermore, compliance with the business rules under the Building Lots and Buildings Transaction Business Law, such as explanation of important matters and delivery of documents at the time of contract, ensures transparency and fairness in transactions.
Next, the Rental Housing Management Business Registration System was established to ensure the appropriateness of rental management operations. As mentioned above, registration with the Minister of Land, Infrastructure, Transport and Tourism is mandatory for companies that manage more than a certain number of units (in principle, more than 200 units), and registered companies are required to fulfill obligations such as appointing a business manager, explaining important matters, managing property separately, and making regular reports. The significance of the registration system is that it improves public confidence in property management companies and enables the government to provide guidance and corrective action in the event of fraud or trouble. Registered companies are subject to periodic and ad-hoc checks by the supervisory authorities to maintain and improve the level of their services. In fact, since the enforcement of the Rental Housing Management Business Law, there have been reports of on-site inspections by the Ministry of Land, Infrastructure, Transport, and Tourism, as well as orders to suspend operations for violators, raising awareness of legal compliance throughout the industry.
INA&Associates also complies with laws and regulations and operates under the proper licenses and registrations. We believe that compliance with the legal framework is the cornerstone of a relationship of trust with our clients (owners and tenants). Providing safe and secure property management services under a solid legal compliance system is the only way to fulfill our social responsibility as a company.
INA&Associates is a real estate brokerage and property management company based in the Tokyo metropolitan area and the Kansai region, providing services that are rooted in each region.
For example, in Osaka, there are rental business customs unique to the Kansai region (such as the practice of "shiki-iki "* and the prevalence of the use of guarantee companies). INA&Associates was founded in Osaka and offers flexible management services based on local market trends and business practices.
On the other hand, in the Tokyo metropolitan area of Tokyo and Kanagawa, there is a wide variety of property sizes and tenant demographics, requiring a high level of expertise and mobility in property management. Tokyo is, needless to say, a market with strong rental needs and fast-changing trends, and INA&Associates provides data-driven management in Tokyo by collecting and analyzing the latest rental market information and incorporating it into vacancy countermeasures and rent setting. In Kanagawa (Yokohama, Kawasaki, etc.), INA&Associates also utilizes its region-based network to provide prompt services from tenant recruitment to daily management. Our extensive on-site experience in each region enables us to make appropriate proposals and responses to owners.
(*Security Deposit: A practice, common in the Kansai area, in which a certain amount of the security deposit, which is not returned at the end of the contract, is contractually agreed upon in advance. In recent years, the use of guarantee companies has become more common throughout Japan, and the traditional practice of security deposits and deductions is gradually changing).
The modern property management industry cannot be described without the use of information technology. INA&Associates has been working on the "fusion of real estate and IT" since its inception, aiming to bring a breath of fresh air to an industry where old customs still remain. We are aiming to breathe new life into an industry where old conventions remain.
Specifically, we are taking on the challenge of next-generation rental management that makes full use of cloud systems andIoT technology. We have introduced property management software that runs on the cloud and centrally manages contract information, tenant information, repair history, and income/expense data. This allows everyone in the company to access the latest information in real time, and allows us to respond quickly and accurately to inquiries from owners. Management tasks that in the past were complicated by paper ledgers and Excel have been made significantly more efficient by shifting to cloud management.
We also utilize IoT devices such as smart locks and facial recognition systems to save labor in key delivery operations and improve security. We have succeeded in minimizing the burden on our customers (owners and tenants) by providing efficient and transparent services through the power of technology.
In addition, we are actively introducing non-personal IT services such as electronic contracts and online customer service. For lease and management contracts, we utilize electronic contracting services such as CloudSign, which enables us to smoothly conclude contracts with owners and tenants who live far away from the company. We have also established an online property viewing system to provide detailed information to prospective tenants without having to visit the property. As a result of these DX initiatives, we have achieved high occupancy rates and improved profitability throughout the entire process from tenant recruitment to contract signing and management, and we have the support of many owners.
However, no matter how much technology advances, we must not forget that the essence of the property management business is the relationship of trust between "people" and "people," and while we promote DX to improve operational efficiency, we maintain a corporate culture that does not neglect personal attention and sincere communication. We believe that the fusion of the latest technology and on-site capabilities ( people power) will create sustainable value in the property management industry in the future.
The last and most important element in property management is "people", and at INA&Associates, we consider our employees not as "human resources" but as "human assets", and we regard them as irreplaceable assets. This is not just a difference in terminology, but an expression of our management philosophy that "people are the source of the company's value creation. This philosophy permeates throughout the company, and we continue to actively invest in human resources based on the belief that the growth and success of each and every employee leads to the growth of the company.
One specific human capital investment initiative is the enhancement of our education and training programs. In addition to specialized knowledge of rental management and mastery of related laws and regulations, we also provide a wide range of training, from the latest IT skills to customer service and communication training, to support the skill development of our employees. We also focus on supporting the acquisition of qualifications, and encourage employees to acquire qualifications directly related to their work, such as certified real estate transaction agents and certified rental property business managers. By providing these learning opportunities, we nurture professionals who can provide high quality services in the field.
Secondly, we emphasize the sharing and penetration of our corporate philosophy, and we regularly hold discussions on our management philosophy and vision to ensure that all INA & Associates employees understand and share the company's direction. Through the newsletters in which I personally send out messages, I repeatedly tell the employees "why we are in this business" and "what value we should provide. We believe that when employees empathize with our philosophy, understand their own roles, and act proactively, this will be the driving force to build a true corporate brand.
We also emphasize "integrity" and "positive attitude" in our hiring policy. We place particular emphasis on whether new hires haveempathy for our philosophy and asincere and positive attitude, rather than on their background or skills. This is because we believe that the property management business is all about relationships of trust between people, and that only people who can deal with owners and tenants with sincerity can serve in this position. During the recruitment interview, we focus on the values and personality of the applicant, and carefully assess whether or not the applicant can "act with integrity and customer focus" and "empathize and cooperate with the team's philosophy. This commitment to human resource selection ultimately fosters a corporate culture of integrity throughout the organization, which is reflected in the quality of our services.
Based on our belief that "the growth of human resources leads to the growth of the company," we will continue to spare no expense in investing in human resources. We will continue to create an environment in which each and every employee can maximize his or her potential and create a workplace in which all human resources can shine. As an extension of these efforts, we are confident that we will be able to provide better services to owners and tenants and achieve sustainable growth as a company.
In this article, we have answered the question of what the property management industry is, explaining a wide range of topics from legal definitions, day-to-day practices, and the changing environment surrounding the industry (regional characteristics, DX, and human resources). The property management business is a job that can only be performed with both reliability backed by legal compliance and the ability to respond meticulously onsite. A management company that fulfills its responsibilities under the Building Lots and Building Transaction Business Law and the Rental Housing Management Business Law, while at the same time innovating its services by adopting the latest technology and carefully nurturing its human resources - a management company with such comprehensive capabilities will be a truly reliable partner for its owners.
INA&Associates pursues professional property management that satisfies both owners and tenants, while utilizing our experience gained in Osaka, Tokyo, and Kanagawa, and striving to comply with laws and regulations and improve service quality. Based on our philosophy that "the most important asset of a company is its human resources," we are committed to building a new model of property management business for the new era that combines human resource development and the use of technology, and to continuing to be a necessary presence in society. Backed by the trust of all stakeholders, we will continue to fulfill our responsibilities with sincerity and open up new possibilities for the property management industry.
We hope this article has helped you to deepen your understanding of the real estate management industry. If you have any questions or concerns about property management, please do not hesitate to contact us, INA & Associates is a team of knowledgeable and passionate people who are committed to helping you manage and operate your valuable assets.