Unit XX is Going to Auction | What the Management Association Should Do in That Situation
The "Destination of the Unit" Beyond the Delinquency Problem: From the Front Lines of Condominium Management Fee Delinquency, Part 26
Toward the end of the board meeting, the atmosphere in the room becomes a little heavy due to one agenda item.
“Regarding Unit XX...”
The property manager flips through the documents.
“It seems that mortgage payments are also in arrears, and the bank is starting to take action.”
One board member asks,
“Does that mean it will go to auction?”
Another board member continues,
“I’ve also heard of something called voluntary sale.”
In the field of condominium management, when delinquency continues for a long time, the discussion sometimes moves to the disposal of the unit itself. The terms that often come up at that time are “auction” and “voluntary sale.”
Today, I would like to clarify the differences between these two and how the management association should be involved, from a field perspective.
This article is written for the following people:
・Those who have just become board members and are confused about how to deal with delinquency problems
・Those who have just started working in front-line management at a property management company
I hope this will be a hint to help you take a step forward from the state of “not knowing where to start.”
▼1: “What happens to management fees if it goes to auction?” Board meeting questions
The amount of delinquency piles up. Management fees, repair reserve funds, parking fees—totaling 800,000 yen, 1 million yen.
Then, information comes in that “it seems they aren’t paying their mortgage either.”
The board meeting conversation goes like this:
Board Chairperson:“If the bank starts an auction, what happens to the management fees and other charges?”
Property Manager:“There are cases where they can be recovered, but it is not guaranteed to be the full amount.”
Board Member:“Is a voluntary sale better?”
Auctions and voluntary sales. While they may seem similar, their mechanisms and outcomes differ significantly.
This is where things start to get confusing on the ground.
▼2: Court Route or Negotiation Route?
First, I want to clarify the difference between the two.
Auction is
a compulsory sale procedure led by the court.
If mortgage payments stop, the bank files a petition with the court, and a buyer is determined through bidding. The owner's wishes are basically not reflected.
The sale price tends to be lower than the market price, and it takes time to find a buyer.
Voluntary sale is
a method where the bank and the owner negotiate and sell the property as a standard real estate transaction. A real estate company acts as an intermediary, and a sale at a price close to the market value can be expected.
In short,
an auction is the "court route,"
and a voluntary sale is the "negotiation route."
In the field of condominium management, voluntary sales often lead to faster resolutions.
The price tends to be higher, and it is easier to find a buyer.
As a result, the settlement of unpaid management fees is more likely to be brought to the negotiating table.
▼3: The "Four Flows" Common in the Field
Pattern 1: Sudden Auction
Mortgage payments continue to be in arrears, and the bank files for an auction.
The management association finds out in the middle of the process.
Unpaid management fees remain as they are, and opportunities for collection are often missed.
Pattern 2: Resolution via Voluntary Sale
The bank and the owner consult, and a real estate company acts as an intermediary.
A buyer is decided, and the sale is completed.
In this case,
unpaid management fees may be settled from the proceeds of the sale.
Whether the management association was involved early on
is what determines the outcome here.
Pattern 3: Auction After Long-term Vacancy
Management fees and mortgage payments,
both remain unpaid for several years.
By the time the auction begins,
it is not uncommon for the arrears to easily exceed 1 million yen.
Pattern 4: Voluntary sale without the involvement of the management association
Discussions for a voluntary sale proceed behind the scenes.
As a result of the management association not taking action,
the sale is completed while the handling of the delinquent management fees is left behind.
▼4: The '4 Actions' the Management Association Should Take
In situations involving auctions or voluntary sales, the management association also needs to act proactively.
1. Accurately organize the amount of arrears
Organize the management fees, repair reserve funds, and late payment damages,
and have the accurate figures ready.
The starting point for negotiations begins with 'how much is in arrears'.
2. Prepare for inquiries from real estate companies
In a voluntary sale,
you may receive inquiries from brokerage firms asking,
'How much are the delinquent management fees?'
You want to have a system in place to provide information quickly and accurately.
3. Confirm the settlement conditions within the sales contract
How to handle delinquent management fees
must be confirmed within the sales contract.
Do not leave it to the brokerage firm.
It is important for the management association to show its intention to confirm.
4. Check auction announcements and property documents
In the case of an auction, check the court's announcements and property documents.
You may also be asked to submit information on management fees.
An attitude of opening a window for involvement yourself will lead to recovery later.
▼5: Condominiums that were able to recover 1.1 million yen in arrears and those that were not
In one condominium, the arrears reached 1.1 million yen, and mortgage payments had also stopped.
While the bank was proceeding with a voluntary sale, a real estate company contacted the management company.
"How much are the unpaid management fees?"
The board of directors discussed it and agreed to settle a portion from the sale proceeds.
They were able to recover most of the arrears.
On the other hand, in another condominium, the management association did not take action even after the auction began.
When a new owner appeared after the winning bid, most of the unpaid amount remained in limbo.
What separated the two was information and the timing of the action.
▼ Summary: Act calmly as a community
A condominium is a single community.
A problem with one unit can shake the entire financial plan or repair plan.
Auctions and voluntary sales are by no means rare occurrences.
Instead of saying "it has nothing to do with the management association,"
understanding the situation and getting involved—that is what is required.
Rules are not there to bind people.
They are there to protect our lives.
To that end, act calmly but surely. That is the role of the management association.
▼ Today's One Action
The next time an arrears case arises, please try confirming this:
"Are you aware of the status of the mortgage?"
This one question becomes the gateway to seeing the future of that unit.
Thank you for reading this far. If you feel that "maybe we can take action at my condominium too," I would be happy if you could let me know by clicking the like button.
I will continue to share useful perspectives from the field. Please follow me if you would like to see more.
いいなと思ったら応援しよう！
初めて管理組合の理事になって、滞納問題に苦慮されている方のお力に微力ながら貢献できればと思っております。応援よろしくお願いします！