-Appeared on Apartment Association Greater Los Angeles (AAGLA).
It’s been three years since the City of Los Angeles started sending out orders requiring seismic retrofits of vulnerable soft-story and non-ductile concrete buildings.
Soft-story property owners, upon receipt of these official notices, were required to:
- Submit proof of a previous retrofit, or plans to retrofit or demolish (within 2 years)
- Obtain a permit to start construction or demolition (within 3.5 years)
- Complete retrofit construction (within 7 years)
Given these deadlines and the three years that have transpired since the first orders were mailed, what percentage of the city’s vulnerable soft-story buildings have been retrofitted so far?
City officials were briefed last month that only 14 percent of soft-story buildings have been retrofitted. None of the concrete buildings issued these orders has completed the work, according to a recent report by City News Service.
Yes, owners of these structures still have time to complete the retrofit process. (Non-ductile concrete buildings were given 25 years to get the job done.)
But the fact remains that waiting could be much costlier for these building owners, given the risks associated with liability, loss of income and tenant relocation, should the building be damaged in a quake.
A Case of Negligence
Building owners who know their buildings are vulnerable to damage and or collapse in an earthquake are liable — even if their deadline to retrofit their buildings has not yet passed.
This was the precedent set by a case in Paso Robles, where, during an earthquake in 2003, two employees of a clothing store were crushed to death by falling bricks and plaster as they ran out of a building. The unreinforced masonry building had been ordered by the city to be seismically retrofitted but the deadline to do it had not yet passed.
The families of the women sued the property owners and won. A jury awarded them $2 million, finding that the property owners were negligent because they knew the building had the potential of being unsafe in an earthquake and yet they did nothing about it. A state appeals court upheld the verdict in 2010.
The precedent was set: It didn’t matter whether the quake was an “act of God” or that the building technically complied with city building codes because the deadline for the retrofit had not yet passed. The jury determined that the simple fact of knowing a building is unsafe and not taking action is grounds enough to assign blame through negligence.
Here’s why it makes sense to retrofit now:
1. Retrofits protect building equity:
They guard against loss that could bring about a reduction in your property’s value or a total loss of the building, depending on the damage.
2. Retrofits protect a building’s cash flow:
Structures that withstand the force of a major earthquake are able to continue business as usual. That means tenants will be able to continue to live or do business there without any disruption to the income generated from that property.
That means you can continue to collect rent if your building is still standing. If your building is retrofitted and in Los Angeles, you will be able to add a rent increase to help pay for up to 50 percent of the costs of your retrofit.
This is an important point because you will still be required to pay on your mortgage even if your property is red-tagged.
3. Retrofits guard against demolition costs:
If your property is red-tagged, you will be responsible for the demolition and cleanup of the property.
This can significantly add to the costs of recovery — particularly for older structures that may contain hazardous materials such as asbestos and lead.
4. Retrofits may be needed for refinancing
Because of the growing understanding about building vulnerabilities and the types of structures most prone to damage from an earthquake, many financial lenders are now requiring a structural analysis as a part of any lending or refinancing package.
That means that even undamaged, your building may be unable to qualify for a new or revised loan. Prospective buyers may also have trouble getting financing for the purchase of your building if it is not protected against earthquake damage.
5. The cost of retrofitting will go up as deadlines draw near
There is still time right now to shop around, contact multiple retrofit companies and negotiate a price that is reasonable under current market conditions.
Given that most property owners at this point are dragging their feet and waiting to have the work done: It is likely that there will be a glut of building owners desperate to meet their deadlines at the last hour — and not enough capacity among reputable firms to complete the work in a timely manner.
The simple laws of supply and demand, under these circumstances, will most certainly increase the cost of a retrofit. Start the process now, while you are still ahead of the game.