The Tragedy of Condominiums: Legal Responses to Collective Action Problems after the Kobe Earthquake

Abstract

This Article explores condominium recovery following the 1995 Kobe (Great Hanshin) Earthquake as a case study of law's role in facilitating collective action. The quake damaged more than 2,500 condominium complexes, leaving unit owners with the collective action problem of how to dispose of the property from among their options under the Japanese Condominium Law: restore, reconstruct, or sell. The evidence from Kobe, buttressed by (or at least not inconsistent with) comparative evidence from California, shows that law was facilitative, and, at a minimum, satisfactory, in the disposition of property. This finding suggests that a law that includes (a) a high supermajority vote threshold and (b) a method for combining fragmented interests encourages timely recovery and aids owners in overcoming collective action problems in a fair and efficient manner. While market forces might lead to similar private solutions, we argue that market failures such as those seen in the Japanese condominium market probably make law a preferable option.