The scandal surrounding structural flaws and falsified data for a tilting residential building in Yokohama has cast a spotlight on loopholes in the real estate industry’s entrenched system, according to experts who speculate the trouble may turn out to be just the tip of an iceberg.

A number of piles providing underground support for one of the four buildings in the Park City Lala Yokohama residential complex in Tsuzuki Ward, designed to rest in rock, have been found to be too short or else had their construction records falsified.

The scandal involves major real estate developer Mitsui Fudosan Residential Co., the prime contractor Sumitomo Mitsui Construction Co., and subcontractors Hitachi High Technologies Corp. and Asahi Kasei Construction Materials Corp.

The misconduct was allegedly caused by a single veteran worker at Asahi Kasei Construction Materials Corp., who falsified data on the piling work. He reportedly did not record the needed data because he was out sick with the flu.

Nobuya Tsutsui, executive director of the Japan Institute of Architects (JIA), believes the complexity of the flow of a construction project, which involves various sectors, can have a direct negative effect on the finished product.

“It’s not only the fact that it’s multilayered but it is work across all sorts of sectors,” he said.

Tsutsui points out that in the case of Park City Lala Yokohama, the fact that the piling work was subcontracted to two companies was one of the factors leading to a higher probability of misconduct.

Following a meeting to reassure the residents held by Mitsui Fudosan Residential, which sold the 705 units in the complex, Asahi Kasei Construction Materials President Tomihiro Maeda admitted in front of reporters that “there were many flaws in how the operation was managed.”

“When the workflow is so detailed and complex, it is almost impossible to check the results at each stage,” Tsutsui of the JIA said. “We need a more transparent system defining subcontractors’ roles and their responsibilities, which should also be more comprehensible for housing buyers.”

Masahito Hirai, executive vice president of Asahi Kasei Corp., said during the news conference in Tokyo on Tuesday afternoon the work “should have been checked by supervisors as part of the (normal) workflow.”

Shuzo Taniai, a lawyer specializing in housing construction problems, blames the situation on the lack of a proper system enabling thorough checks of a subcontractors’ work, which, he suggested, should be supervised by a third-party panel.

“The company entrusted the (piling) work entirely to the subcontractor, believing they would properly do their work,” Tsutsui added.

He also speculates that a shortage of workers might be a root cause of such problems.

Because the condominium market has been performing well, developers are trying to make money while the market is still hot, and they are pushing irrational deadlines, he said. “It wouldn’t be surprising if there were more flaws and defects in buildings constructed by other major companies, but have yet to emerge.”

Tsutsui said that during a housing upturn, there tends to be a shortage of skilled operators of heavy machinery and those qualified to supervise such varied work.

Similar flaws were discovered during the bubble era, as the industry was also struggling with a lack of skilled operators amid a surge in demand, he said. This often led to work results being taken too lightly by inspectors.

Hisashi Ogawa, of a Nagoya-based nonprofit organization comprising architects and construction consultants supporting consumers involved in real estate problems, also believes that construction work should be checked by a third party.

“The more independent companies are involved in the process, the more difficult it gets to monitor such work,” said Ogawa.

He speculated that in the  recent incident there was no one to check whether the work had been done properly.

“When a developer is involved in the project, the decision regarding how the money is distributed to finalize the project may have an impact on how the whole process is carried out and supervised,” he said. “It is likely that the companies may hide some flaws they are aware of to meet the deadlines.”

Architect Haruyasu Kawaguchi, a member of Kenchiku Gmen, a Tokyo-based nonprofit group that provides consultations for people living in defective housing, points out that design and construction work is often conducted by just one contractor.

“It doesn’t allow a third party to observe the work in progress and as a result only people involved in the work can actually see the results,” he said. “If designers, construction supervisors and operators had a chance to oversee the progress, they would have a chance to notice some flaws. I believe that the fact the entire process is finalized within one company allows those firms to conduct the work sometimes in a substandard way.”

Unaware of the project’s complexity and expecting the developer to take responsibility for possible defects, condo owners and prospective buyers can only rely on the reputation of the construction firm or developer.

A woman in her 50s who lives with her husband and daughter in one of the buildings in the Yokohama complex said they decided to buy there “because it is a company with a good reputation, and we thought we could trust it.”

“I think no one reads those lengthy purchase agreements thoroughly,” she said of the sales documents, which include detailed information about warranty against defects and the builder’s responsibility, as they are often hard to understand.

“If I had to say whether I feel betrayed, I’d say ‘yes,’ ” said a resident whose unit has not been directly affected but is concerned about future developments.

His condo is located on the opposite side of the complex, where he lives with his wife and three children, the eldest currently attending a nearby elementary school.

“I have to admit I chose this complex because it’s a well known, trusted company,” he said.

Kawaguchi of Kenchiku Gmen suggests that to reduce their risk, condo buyers should seek expert advice before signing the agreement.

“It may help discover cracks or other defects, which can later result in bigger constructional problems,” he said.

Under current law, companies selling new residences are required to provide a 10-year warranty against defects, but only certain parts of the unit are covered.

Kawaguchi said structural defects normally emerge within 10 years of completion. He pointed out, however, that many construction firms, when responding to owners’ claims regarding visible cracks or similar problems, often offer maintenance or repairs without inspecting or getting to the root of the problem.

“But in reality, in many cases, the cracks get larger with time,” Kawaguchi said, adding his group often supports consumers dealing with such problems.

“(Condo) owners should pay attention to such small defects because after the warranty period ends it is easier for companies to deny responsibility, saying it might have been accidentally caused by the owner. We can’t deny that some firms may be using this legislation to their advantage.”

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