by Steven Beltramo, Project Manager, Association Reserves
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.
Can I pay with Reserves?
Your Reserves are for predictable repair and replacement projects. The Reserve fund for most associations is already “underfunded” for existing Reserve components, so associations should not consider their Reserves as readily available for this new project. In addition, the amount of funds needed for EQ retrofitting is overwhelming compared to the size of the typical Reserve fund as a whole (even if your Reserves are Fully Funded). Finally, because the retrofit ordinance is a legislated mandate, this project does not meet National Reserve Study Standards for a Reserve expense. If this project is (inappropriately) added to your Reserve component list, it will overwhelm your other Reserve projects and mask the true condition of your Reserves.
Depending on the timing of your existing Reserve projects, you may be able to borrow some Reserve funds (perhaps $500 to $1000/unit) to seed this retrofit project while other funding (one or more emergency special assessments enacted by the board, or a loan) is established. Civil Code 5515(d) allows an exception to 12 month “borrowing from Reserves repayment” rule in cases such as this.
Bottom line: retrofitting will be expensive and may create a trying few years, but could save your life when “the big one” hits!
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