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  • How SoCal Real Estate Investors are being Impacted by Seismic Ordinances

    Wednesday, May 15th, 2019

  • An increasing number of cities throughout Southern California are adopting mandatory seismic (also known as earthquake retrofit) ordinances. The latest city to do so was Pasadena which passed its ordinance in June. These ordinances are not new but there does seem to be an uptick in the number of cities moving forward to put mandatory ordinances in place. Cities first started discussing and then enacting these ordinances in response to the poor performance of certain classes of structures during the big earthquakes to hit California; the 1989 Loma Prieta and 1994 Northridge earthquakes.

    What is a seismic ordinance?

    A seismic ordinance is a law passed by local authorities requiring the evaluation and retrofit of specific building types proven to be vulnerable to seismic events. The intent of these ordinances is to improve the safety of occupants and reduce the damage that will occur when the next big earthquake hits. These ordinances outline minimum requirements to improve the safety of “vulnerable” buildings. The focus is on improving the safety of occupants by increasing the likelihood that they will be able to exit the building safely during an earthquake. These ordinances are generally not intended to meet current building code requirements.

    How do these ordinances impact investors?

    Of course, all stakeholders; owners, landlords, investors, lenders, occupants and cities, want their buildings to be safe in the event of an earthquake or any other natural disaster. But safety comes with a price. If you own / invest in a property subject to a retrofit ordinance, there are several costs to consider. There is the expense of conducting the evaluation and then the cost to complete the work necessary to make the improvements. Most of the ordinances have a schedule for getting the evaluation and improvements completed and a building owner could be assessed penalties if the deadlines are missed. Add to that the loss of rental income while the improvements are being made.

    The ability to obtain financing for a property that will require a retrofit will also become more difficult. Most lenders will check the records to see if the property is on the retrofit list. Many of these lenders will require a written plan of action by the borrower. Some lenders will even require a copy of the engineering report and proposal and may not release funds until the work is completed.

    What should investors do?

    Stay informed. Contact your local government officials for more information on current and future earthquake retrofit ordinances.

    Here are the SoCal cities that already have mandatory retrofit ordinances

    Los Angeles – A seismic ordinance was passed in October of 2015. This ordinance requires retrofit of over 15,000 soft story and non-ductile concrete buildings. Buildings deemed most vulnerable have been identified with the following criteria:

    • Consist of 2 or more stories wood frame construction
    • Built under building code standards enacted before January 1, 1978
    • Contains ground floor parking or other similar open floor space
    • The program does not apply to residential buildings with 3 or less units.

    Costs

    • Retrofitting can cost upwards of $130,000 for wood-frame buildings and millions of dollars for larger concrete buildings.
    • Once the work is completed, an owner can recover 50 percent of the cost through the city’s Seismic Retrofit Program.

    Pasadena – A seismic retrofit law went into effect last month; June 2019.

    Schedule: Owners have 3 years to submit plans and obtain retrofit permits; 7 years to complete the retrofit.

    Buildings not brought into compliance according to the schedule will be declared unsafe. Violation of any provisions may result in fines and / or imprisonment.

    Beverly Hills – The retrofit ordinance became effective on January 11, 2019.

    West Hollywood – The city of West Hollywood has two ordinances that became effective in 2018. Ordinance 17-1004 establishes the mandatory provisions for strengthening existing wood-frame buildings with soft, weak, or open-front walls. The ordinance also contains provisions for cripple walls and sill plate anchorage in existing wood-frame buildings. Ordinance 17-1011 establishes the mandatory provisions for strengthening non-ductile concrete structures. The ordinance also contains provisions for buildings constructed with pre-Northridge steel moment frames.

    Santa Monica – The city of Santa Monica passed a comprehensive seismic retrofit program on March 28, 2017. In addition to wood-frame soft-story structures, the program also addresses unreinforced masonry, concrete tilt-up, steel moment frame, and non-ductile concrete buildings.

    Burbank – The city of Burbank has established three mandatory programs that affect commercial construction only. Currently, the ordinance affecting light wood-framed residential construction is voluntary. The requirements can be found in Burbank Municipal Code Title 9, Chapter 1, Article 7. The mandatory sections included retrofit requirements for unreinforced masonry buildings, reinforced concrete & masonry buildings and welded steel moment frame buildings.