City of Los Angeles: Can I Recover Seismic Retrofit Costs for my Multi-Unit Property?

Dear Investor,

I wanted to bring to your attention a recent consultation I had with a client who owns an 8-unit property located in Van Nuys, CA. This property is subject to the mandatory Seismic Retrofit Ordinance that came into effect on November 22, 2015.

I have attached a picture of the building for your reference. As you can see, it is a wood-frame structure with open-front walls. According to the Department of Building and Safety, this design poses a potential earthquake hazard and is considered unsafe in the event of an earthquake.

The total cost of the retrofit for my client's property amounted to $95,000, which has placed a significant financial burden on him. Additionally, the rents for all the units are well below the market rates. However, I have informed my client that he does have the opportunity to recover a portion of the retrofit costs through The Seismic Retrofit Work Cost Recovery Program.

Effective from November 22, 2015, the City of Los Angeles implemented mandatory standards for reducing earthquake hazards in existing wood-frame buildings with soft, weak, or open-front walls, as well as non-ductile concrete buildings. Under this statute (Ordinance No. 183893), the Department of Building and Safety has identified approximately 12,000 buildings that fall into this category and sent courtesy notices to the respective property owners in March 2016.

The costs associated with a seismic retrofit job can be excessive. To assist property owners in recovering these expenses, The Seismic Retrofit Work Cost Recovery Program was introduced on February 12, 2016 for City of Los Angeles building owners only. This program allows for a temporary rent surcharge to be imposed on tenants, based on the following guidelines:

1.  Approval from the Los Angeles Housing Department (LAHD) to pass through up to 50% of the total seismic retrofit costs, divided equally among all rental units.

2.  A maximum monthly rent increase of $38 for a period of 120 months. The recovery period may be extended until the full approved amount is collected.

If you require more information on how to apply for The Seismic Retrofit Work Cost Recovery Program, please feel free to email Shant Sherbetdjian or call the office directly, and we will be delighted to provide you with the necessary details regarding the program.

Sincerely,

Southern California Apartment Group

Shant Sherbetdjian