Los Angeles condo owners face costly mandate for earthquake retrofit

By Deborah Goonan, Independent American Communities

California is earthquake country, and cities such as Los Angeles have seen their share of damage from seismic activity. Older multifamily structures are most vulnerable to damage, especially multistory condo and apartment buildings with tuck under garages at ground level. When earthquakes strike, it is common for the posts supporting the second story to fail, causing the entire parking garage to collapse.

Although Californians can purchase earthquake insurance, it tends to be rather expensive, especially for condominium associations. And, according to the LA Times, 5 out of 6 homeowners choose not to purchase earthquake insurance.

Recently the City of Los Angeles passed two Ordinances that mandate owners of certain older multifamily structures (built prior to 1978) to retrofit for the City’s safety standards.

 

EQ Retrofitting in Los Angeles, 2017

Posted on March 6, 2017 by Robert M. Nordlund, PE, RS
by Steven Beltramo, Project Manager, Association Reserves

The Issue:

Homeowners and Association Managers need to be aware that the City of Los Angeles has passed Ordinances 183893 and 184081, city laws that require the earthquake retrofitting of buildings that fall below current safety standards. The ordinance is intended to reduce the risk of injury and loss of life that may result from the effects of earthquakes. In this article we will address how these Ordinances relate to community associations and their Reserves.

Does this Apply to Me?

The City of Los Angeles is preparing and sending Orders to Comply to approximately 15,000 buildings determined to be at-risk: multi-family buildings (4 or more units) built to standards predating 1/1/1978. Generally these will be multi-story wood buildings with ground-level parking under living space. An easy way to check if your building is affected is online at http://zimas.lacity.org/. Follow these steps: search your building in the look-up bar. Click the “jurisdictional” tab, then click “building permit info view” and a list of all permit information will come up. This tool only works for properties within the City of Los Angeles.

Addressing the Issue:

If your association receives an Order to Comply, you essentially have seven years to complete your retrofit project. Your first step should be to hire a licensed professional engineer to confirm the City’s preliminary diagnosis, seeking a waiver if your building has been incorrectly identified as being at-risk. If your building requires a retrofit, it will be expensive. Depending on your building’s design, ballpark costs will likely be $10,000 – $25,000/unit.

Read more:

https://www.reservestudy.com/blog/eq-retrofitting-los-angeles-2017?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+AssociationReserves+%28Association+Reserves%29

 

What does this mean to condo owners affected by the mandate?

Owners will have 7 years to complete the retrofit, but according to one Reserve Study company, owners in older condo associations may have to fork over $10,000 – $25,000 per unit.

Ouch!

And since this is a cost not funded by association reserve account funds, that means a special assessment or monthly fee increases over several years to raise the money necessary to complete the retrofit. Or the condo association may consider taking a loan, but that adds the additional expense of interest during repayment.

What if condo owners cannot afford the cost of retrofitting? What if the value of their units does not justify such a large investment?

So instead of the City of Los Angeles simply allowing people to keep their condos at their own risk, the new Ordinances will force them to either pay a fortune for a retrofit or move out forever within 7 years.

That doesn’t provide much choice for owners.

For retrofit construction contractors and association reserve study service providers, EQ mandates provide business opportunities or potential exploitation of condo associations, depending on the ethics of the professionals involved.

For the City of Los Angeles and real estate investors, the legislative mandate also provides the perfect opportunity to purchase older, low-value condo and apartment buildings – and the land parcels beneath them – for relatively little money.

Is this another form of eminent domain to make way for redevelopment? Instead of a city declaring a building or neighborhood as blighted – even if it’s not – in this case, LA official will just deem buildings without the retrofit as unsafe for human habitation.

Enter developers willing to demolish and rebuild modern, luxury condos and apartments, taller and with more units than the pre 1980s build.

Where current condo owners will go from there is anybody’s guess.

 

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3 Replies to “Los Angeles condo owners face costly mandate for earthquake retrofit”

  1. Yes, condo insurance in California is very expensive for these primary reasons:

    1) This is a high seismic activity active zone
    2) Insurance companies limit risk by raising EQI premiums for higher risk zones
    3) They exclude certain areas and properties from coverage
    4) Condominiums and HOAs are treated as commercial properties in California, thus higher premiums
    5) CEA (California Earthquake Authority) only writes up to $150,000 policy value for condos
    6) Maximum face value of policy cannot exceed 50% of replacement costs
    7) Deductibles (5-10-20%) are based upon total replacement value, not the insured value
    8) Condo HOA owners cannot by EQI for exterior and building coverage since a master policy must exist that is purchased by the HOA
    9) Loss assessment coverage (usually a EQI policy rider) is not allowed unless the HOA has purchased a master policy for EQI

    Does anyone need any further reasons as to why ONLY around 15% of California homeowners carry EQI?

    Liked by 1 person

  2. So — What else is new? Greedy Developers, and HOA Lawyers who are backed by Construction Contractors —- . It’s the same old story over and over again.

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  3. What a mess, and gambit it would not matter what these condo owners did they will all get stuck in the middle. Like I have said many times before Condo life should only be a temporary living the cost associated with these buildings will at some point cost more than what the units/properties are worth. With that said I can almost see it now, those property values will go downhill real fast no one will want to buy into this mess, I wouldn’t.

    So it saying again, HOA’s will not and do not protect the value of you HOA property or unit if they did these homeowners would not be facing this problem today it will be more than a nightmare in the days to comes. So yes, the City will cause eminent domain; this means owners will not get top dollar for buyout. Some of Florida area’s are on sinkhole areas, cost for that insurance is sky high and in many cases insurance companies will not even provide insurance for sinkholes in Florida. Lord these owners are in a pickle get out while you can or maybe LA City can help these homeowners find affordable living elsewhere and help with that process. Oh developers are very hungry for land in LA as in most built out areas; land becomes more valuable than the buildings do, I have seen this.

    Like

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