Does your apartment building have earthquake insurance?


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*If you own an apartment in Japan, you can take out optional earthquake insurance. This insurance only covers your apartment and does not cover the common areas of the building or the structure itself. The management association for the building can take out earthquake insurance on the common areas, but as it turns out, less than a third of all buildings are covered.

Owners of apartments in uninsured buildings are facing great repair bills as a result of the March 11 Tohoku Earthquake.

One of the affected buildings is a 13 yr old, two tower apartment building in the outskirts of Sendai City which suffered some serious damage to one of the towers. The damage from the earthquake was severe enough to cause cracks which exposed the reinforcing mesh, as well as holes large enough to see into residents’ apartments. The front entrance to one apartment had contorted so much that the door could no longer open and close and had to be boarded up.

“Everyone is concerned about whether we can continue to live in this building after the damage it has sustained” said a resident.

A repair bill over 100 million Yen

A large amount of money is required to repair the common space areas in this particular building. However, the management association never took out earthquake insurance. They are now looking at a repair bill of over 100 million Yen. Despite the building being relatively new, the damage was rather serious.

Discussions with the management association are also not going smoothly. Because the degree of damage was more severe for only one of the two apartment towers, residents were initially divided on the issue. By the end of May, an interim management meeting was held and it was decided to conduct a building investigation.

According an investigation by the Condominium Management Companies Association, 61 buildings suffered medium damage where reinforcement and repairs were necessary, and 1070 buildings suffered slight damage where small cracks developed in walls and tiles needed replacing.

While buildings in Sendai City suffered from visible structural damage, land liquefaction caused a different type of damage Chiba’s Urayasu City.  Gas and water and sewer services were disrupted for some time.

Repair work will be a daunting task for apartment management associations whether they have earthquake insurance or are uninsured. Even with insurance, if the building receives a low assessment, the burden to the management association and apartment owners will be high.

Only 30% of apartment buildings have earthquake insurance

According to a 2008 survey by the Ministry of Land, Infrastructure, Transport and Tourism, only 30% of management associations had taken out earthquake insurance against their apartment buildings. The main reason for being uninsured was the comparatively expensive insurance premiums.

An uninsured management association has two options to pay for repairs – collect a one-time payment from all apartment owners, or borrow the funds. But, getting the agreement of apartment owners is a difficult process.

Compared to houses, the support system for apartment buildings is lacking. Under the Natural Disaster Victims Relief Law, relief funds are only paid to those households who have suffered damage to their place of residence. There is no support provided to owners of damaged properties who do not live there or are leasing them out to tenants.

The amount of aid for property owners who have been affected by land liquefaction is determined by the degree that their property is tilting on the land. If the only damage is to underground pipes, then no support is provided. However, a special exception was made to the management associations in Urayasu City. Assistance of up to 1/3rd of the repair costs (up to a maximum of 30 million Yen) was provided for restoring water and gas pipelines.

The President of the Japan Institute for Condominium Living, Hideki Kobayashi, believes that the support system should not just be aimed at private property owners, but should also be directed towards management associations.

Earthquake damage to other buildings in Sendai City

Source:
The Yomiuri Shimbun, June 9, 2011.