What does a 5% management fee cover? The other fees to check
Management fees in Japan are usually a percentage of monthly rent, but both the rate and what it covers differ between companies. Two companies charging 5% can leave you with quite different amounts.
First, check what the fee is charged on. Is it rent only, or rent plus the common-area charge and parking? The same rate on a larger base is a larger fee. Also ask whether the fee stops while a unit is empty, or is a fixed amount based on full occupancy.
Next, check whether tax is included. "5% before tax" is 5.5% once consumption tax is added; "5%, tax included" stays at 5%. Put every quote on the same basis before you compare.
For example, if the rent across a building totals 500,000 yen a month, a fee of "5%, tax included" is 25,000 yen a month, or 300,000 yen a year. "4% before tax" is 4.4% with tax, or 22,000 yen a month and 264,000 yen a year. The difference in rate is 36,000 yen a year. How the other fees listed below add up at each company can make the real gap larger or smaller, so compare the total you would pay over a year.
What the fee covers also varies. Collecting and remitting rent, handling tenants' questions, chasing arrears and monthly reporting are often included. Get in writing where the fee's scope ends and separate charges begin.
Then ask about fees charged separately from the management fee. Common ones are an advertising fee (AD) when finding a tenant, an administration fee at lease renewal, charges for the move-out inspection and for arranging restoration work, a fee for arranging repairs, and a fee for ending the management contract. The advertising fee is paid to the leasing agent and is sometimes around one month's rent.
The brokerage fee for a rental is capped by a Ministry notice under the Real Estate Brokerage Act: the total the agent receives from landlord and tenant together may not exceed one month's rent plus tax. It is separate from the management fee, so check who pays what when a unit is let.
Repair costs also depend on how quotes are handled. Whether a manager adds a margin to the contractor's quote, or shows you the quote as it is, may not be clear from the fee sheet, so ask directly.
All of this should be in the fee sheet or the management contract. Under the Rental Housing Management Business Act, a registered manager must set out the fee and how it is paid in writing when the contract is made. If a fee isn't written down, get it in writing before you sign.
Once you have signed, use the monthly statement to check exactly what is deducted from the rent and how much. Besides the management fee, it should show who pays the bank charges for remittance and for tenants' direct debits. If deductions are lumped into one line, ask for the breakdown.
Finally, what you are told each month, and who decides on repairs, both affect what you actually spend. If work starts only after you have seen the quote and approved it, spending can't grow without you knowing.
Our management fee is 5% of rent plus common-area charges, tax included, and nothing while a unit is empty. Separately, a leasing fee applies when we find and sign the tenant ourselves. The fee sheet is published, and the monthly statement shows the management fee, repair costs and every other deduction. You see contractors' quotes unedited, and your contract sets the amount above which a repair waits for your approval.