The Crucial Role of Management Companies in Handling Rental Property Mold Issues

Many owners who manage their own rental properties may feel that they are saving on management costs. However, many of them realize how difficult it is to manage a property only when they are faced with situations that require expertise, such as dealing with actual problems, determining legal responsibility, and negotiating with tenants. In this article, we will explain in detail the limitations of self-management and the advantages of outsourcing to a management company through actual cases of mold problems that INA & Associates has encountered (some parts have been changed to protect personal information).

Case Study of Mold Trouble Faced by Self-Managed Owner

Overview of the case: Unexpected occurrence of trouble

The following is a case study of Owner A (company employee), who independently manages a family-oriented condominium in Tokyo that has been newly built three years ago, and who received a complaint from a family of four that has been living in the property for one and a half years: "There is a lot of mold in the bedroom closet and on the bathroom wall. The property is nearly new, so why do these problems occur? I want you to take immediate action." We received a call on Saturday night.

Owner A checked the site the next day and was puzzled by the following situation:

• Unable to determine whether it is a lifestyle problem of the resident or a building problem
• Unsure who should bear the cost of mold removal
• Not knowing how to explain the situation to the tenants
• Do not know what to do if a health hazard is claimed
• Cannot give appropriate advice on future preventive measures

Difficulties in dealing with self-management

Situation identified during on-site inspection:

• Laundry is hung out to dry in the bedroom every day.
• The ventilation fan is rarely used (to save electricity)
• Windows are opened only once a week for ventilation (to prevent hay fever)
• The ventilation fan in the bathroom is also used infrequently
• The dehumidifier or the dehumidification function of the air conditioner is not used at all

Owner A felt that there was "clearly a problem with the resident's lifestyle," but was at a loss to decide how to explain this to the resident and to what extent he should be required to bear the costs. The tenant also made the following objection:

• The tenant said, "The building must be defective if the problem occurs even though the property is nearly new.
• It is common for people to dry their laundry indoors, and if this is causing problems, it should have been explained to them beforehand.
• I am worried about the health hazard to the children. I want compensation for my child's health damage and medical expenses.

Realizing the Limitations of Self-Management

Problems faced by Owner A in this case:

As a result, Owner A decided that he was unable to take appropriate measures on his own, and he urgently considered outsourcing to us.

Risks and Limitations of Self-Management

Difficulty in determining legal responsibility

The most important aspect of rental management is to make appropriate legal decisions when problems occur. Even for a single mold problem, the following complex judgments are required:

1. Civil law liability classifications:

   • Civil Code Article 400 (duty of care)
   • Status of performance of Civil Code Article 615 (duty to notify)
   • Relationship with Civil Code Article 606 (lessor's obligation to repair)

2. Judgment based on precedents:

   • Classification of liability in similar cases in the past
   • Drawing the line between age-related deterioration and tenant liability
   • Distinction between building defects and usage problems

3. Consideration of the Rental Housing Management Business Law:

   • Latest laws and regulations regarding proper management operations
   • Scope of Owner's Obligation to Explain
   • Content of Periodic Reporting Obligations

Professionalism in dealing with tenants

The following professional skills are required to deal with problems with tenants:

Time and Mental Burden

Self-managed owners often overlook the time and emotional cost:

• Response time: Emergency response is required even on weekdays, nights, and holidays.
• Mental stress: direct confrontation and negotiation with tenants
• Learning costs: continuous acquisition of new knowledge and changes in the law
• Opportunity cost: Impact on core business, less time with family

Specific Advantages of Outsourcing to a Management Company

Appropriate decisions based on expertise

The greatest benefit of outsourcing to a management company is the ability to make sound decisions based on a wealth of experience and expertise:

1. Legal basis:

   • Up-to-date knowledge of the Civil Code, Land and House Lease Law, Rental Housing Management Business Law, etc.
   • Appropriate decisions based on past precedents and similar cases
   • Clarification of responsibility classification and explanation of rationale

2. Technical expertise:

   • Expert diagnosis of buildings and facilities
   • Scientific analysis of causes of mold outbreak
   • Proposal of effective preventive measures

3. Negotiation and coordination skills:

   • Constructive dialogue with tenants
   • Proposing mutually acceptable solutions
   • Avoidance of emotional conflicts

Protection of asset value through preventive management

The true value of a management company lies not only in responding to problems after they occur, but also in preventive management:

Reliable 24 hours a day, 365 days a year

Outsourcing to a management company can significantly reduce the burden on the owner:

1. Elimination of time burden:

   • Emergency response on behalf of the owner
   • Response on behalf of owners during weeknights and holidays
   • Enables you to concentrate on your core business

2. Reduction of mental burden:

   • Avoid direct confrontation with tenants
   • Calm judgment by experts
   • Sense of security due to decentralization of responsibility

3. Reduction of financial risk:

   • Avoidance of litigation risk through appropriate response
   • Prevention of damage escalation through early resolution
   • Reduction of unnecessary costs through expertise

Key Points for Selecting a Management Company

How to identify a highly professional management company

Important points when selecting a management company:

1. Legal responsiveness:

   • Whether or not the company is registered as a rental housing management company
   • Legal staff and legal counsel
   • Track record of resolving problems in the past

2. Technical expertise:

   • Expertise in building diagnosis
   • Technical expertise in facility maintenance
   • Ability to propose preventive maintenance

3. Response system:

   • 24-hour emergency response system
   • Frequency and content of periodic reports
   • Measures to improve resident satisfaction

Correct evaluation of cost-effectiveness

It is important to evaluate management fees as an "investment" rather than a "cost:

Compared to typical management commissions (5-10% of rent), the cost-effectiveness is well worth it.

Features of INA&Associates' management services

Full range of legal support

INA&Associates provides appropriate legal support for complex issues such as mold problems:

• Legal judgment in collaboration with our legal advisors and
• More than 1,000 cases solved in the past
• Management methods that comply with the latest legal amendments

Thorough preventive management

We focus on protecting asset value not only by responding to problems after they occur, but also through preventative management:

• Detailed lifestyle guidance at the time of occupancy
• Seasonal reminders and periodic inspections
• Indoor environment monitoring using IoT devices

Full support for owners

• Monthly detailed status reports
• Face-to-face consultation opportunities at least once a year
• Facility improvement proposals and investment payback simulations

Conclusion

Self-management of rental properties may seem at first glance to save on management costs, but it entails many risks and burdens when considering how to respond to actual problems that may arise. In particular , complex issues such as mold problems require multifaceted expertise, including legal knowledge, technical expertise, and negotiation skills.

If, like Owner A in this case study, you look for a management company only after you feel that you are unable to take appropriate action yourself, the problem may have already escalated. It is important to consider outsourcing to a management company from a preventive perspective in order to ensure stable rental management and to maintain and improve asset value.

Management fees are not a "cost," but rather an "investment" that reduces the owner's time, mental burden, and financial risk. By outsourcing to a professional management company, you can expect to increase long-term profitability by improving tenant satisfaction, lowering vacancy rates, and maintaining asset values.

We encourage you to reaffirm the importance of management in your rental business and to build a partnership with a trustworthy management company.

Frequently Asked Questions

Q1: Isn't self-management more economical in terms of management fees?

A1: In the short term, there is a cost associated with the outsourced management fee, but in the long term, outsourced management is more economical. Considering the time cost of dealing with problems, errors in judgment due to lack of expertise, risk of lawsuits, risk of decline in asset value, etc., it can be said that the management fee is an investment that is fully recoverable. In addition, proper management improves tenant satisfaction, and can be expected to lower vacancy rates and maintain rents.

Q2: Even if a property is outsourced to a management company, doesn't the ultimate responsibility rest with the owner?

A2: It is true that the owner has the ultimate responsibility as the owner of the property, but the management company is responsible for the day-to-day management of the property and its associated responsibilities according to the management consignment contract with the management company. By entering into an appropriate management consignment agreement, the owner's risk can be significantly reduced. In addition, the professional response of the management company will enable early resolution of problems and determination of appropriate responsibility classifications.

Q3: I am already experiencing problems with self-management, can I outsource to a management company from the middle of the project?

A3: Of course it is possible. In fact, it is precisely because problems are already occurring that you need the support of a management company that can handle the situation professionally. We offer comprehensive support, from resolving existing problems to establishing a new management system. Please let us know the details of your current problem situation and we will propose the best solution.

Q4: What happens if the management company does not handle the situation properly?

A4: You should choose your management company carefully. If the company is registered as a rental housing management company, there are certain guarantees regarding the appropriateness of their work. In addition , you can check the management company's response by clarifying the scope of responsibility in the management consignment contract and by establishing regular reporting requirements. We emphasize transparent management reporting and regular communication with owners.

Q5: Are there any advantages to outsourcing to a management company even for small properties?

A5: Smaller properties are the ones that benefit the most from outsourcing to a management company. In addition, if the owner handles the problem on his/her own, the relationship with the tenants may easily deteriorate, and there is a risk that the tenants may move out. The professional response of a management company can be expected to improve tenant satisfaction and promote long-term occupancy.

Reference information

• Ministry of Land, Infrastructure, Transport and Tourism "Rental Housing Management Business Act Portal Site
• Japan Rental Housing Management Association
• Ministry of Land, Infrastructure, Transport and Tourism "Troubles and Guidelines Concerning Restoration to the Original Condition
• Revision of the Civil Code (Claims) - Ministry of Justice

If you are an owner having trouble managing your rental property, please contact us for a free consultation. INA&Associates' experienced management staff will propose the best management plan for your property. We will help you manage your rental property with peace of mind by providing comprehensive support ranging from handling tenant issues including mold problems to proposing facility improvements to increase asset value. Please feel free to contact us.