Abstract
A condominium is a complex of rights of shared lot and ownership of divided units. It was only after numerous
condominiums appeared in the market when the laws were enacted in Japan to take control of them. Since then
they experienced a variety of ad hoc and ineffective amendments.
The biggest reason the government has to responsibly intervene into the management of condominiums lies in the transaction cost involved in it, which is one of the market failures. The condominium is a club good which is expected to be managed by a congregation of the owners of complex rights while a single decision is the only possible resolution at its rebuilding.
Although the law is responsible for minimizing the transaction cost of decisionmaking in which involves many people, the Japanese laws on the contrary have lots of erroneous interventions to make it costly. A condominium, the ultimate offspring of the divided paddy fields, is a defective good as it necessitates huge transaction costs in decision-making.
While the proposed amendments of the laws related to the condominiums submitted to the Diet in 2025 include some meaningful provisions such as the relaxation of the requirements for rebuilding resolutions, the termination of leases with rebuilding, and the sale of the lots and other properties after the dissolution of the divided ownership, they do not sufficiently reduce the transaction cost of owners. More drastic amendments thus are required to make it acceptably low.
