Rules
Seismic retrofit commercial lease requirements: who pays?
Seismic retrofit commercial lease requirements: who pays under soft-story and URM rules, ADA, GSA leases, CAM clauses and tax rules.
Seismic retrofit commercial lease requirements decide who pays for mandated work. Local soft-story and URM ordinances trigger the retrofit, and the lease decides how the cost is shared between landlord and tenant.
What to take away
- Local ordinances drive most retrofit mandates. Los Angeles and San Francisco require retrofits of soft-story wood frame buildings, and Seattle and Portland regulate unreinforced masonry.
- An alteration that triggers a seismic upgrade can also trigger accessibility work under the ADA and the International Existing Building Code.
- In Florida, a tenant learns more about building code exposure from the certificate of occupancy, open permits and any notice of violation than from the lease.
- GSA solicitations add seismic performance requirements for space near federal offices, and the landlord often pays.
- Section 179 and cost segregation can reduce the after-tax cost, but structural seismic work often fails the qualified improvement property test.
Where retrofit duties come from
The United States has no national retrofit code for existing private commercial buildings. Building codes govern new construction and alterations. Cities fill the gap with local ordinances.
Local Retrofit Rules by City
Los Angeles
- Rule type
- Soft-story ordinance
- Common trigger
- Tuck-under parking
- Building type
- Wood frame
San Francisco
- Rule type
- Soft story program
- Common trigger
- Ground-floor openings
- Building type
- Wood frame
Seattle / Portland
- Rule type
- URM ordinance
- Common trigger
- Unreinforced masonry
- Building type
- URM
California requires cities to inventory unreinforced masonry buildings and adopt mitigation programs under Government Code Section 8875 et seq. Los Angeles, San Francisco, Berkeley, Oakland and Pasadena enforce soft-story retrofit ordinances, and San Francisco administers its program through the Mandatory Soft Story Retrofit Program. Seattle and Portland regulate unreinforced masonry.
Engineering standards set the scope. ASCE 41 covers seismic evaluation and retrofit of existing buildings. FEMA P-154 supports rapid visual screening. The International Existing Building Code governs alteration permits.
Soft-story ordinances commonly reach wood frame buildings with tuck-under parking, where the ground floor is open at the street line. The required scope comes out of an engineering evaluation under ASCE 41 or a city-adopted standard, and it usually covers new shear walls, steel moment frames or cantilever columns at the garage line, foundation strengthening and roof-to-wall ties. The owner submits plans, pulls an alteration permit and passes inspection on the schedule the city sets in its order.
| Jurisdiction | Rule type | Common trigger |
|---|---|---|
| Los Angeles | Soft-story retrofit ordinance | Wood frame buildings with tuck-under parking |
| San Francisco | Soft story program | Wood frame buildings with ground-floor openings |
| Seattle | URM retrofit ordinance | Unreinforced masonry buildings |
| Portland | URM retrofit ordinance | Unreinforced masonry buildings |
| California | State URM inventory law | Cities must identify and address URM stock |
How the cost reaches the tenant
A net lease often passes retrofit cost to tenants through common area maintenance. Read the CAM clause, the capital expenditure clause and any exclusion for structural work.
- Compliance with laws.Says who must cure a city retrofit order and who pays the fines if the work runs late.
- Capital expenditure amortization.Says whether the landlord may pass a capital cost through CAM, over how many years and at what interest.
- CAM exclusions.Carves structural, roof and foundation work out of operating expenses.
- Notice and cure.Requires the landlord to hand over any notice of violation and gives the tenant time to respond.
- Review or audit right.Lets the tenant inspect the invoices behind a retrofit charge.
Lease structures vary. A triple net lease, a gross lease and a modified gross lease allocate retrofit cost differently, and the same retrofit can land in operating expenses under one structure and in capital costs under another.
The life safety side matters too. A retrofit can change exit paths, stair enclosures and sprinkler coverage. NFPA 101 sets the egress requirements that inspectors apply.
A retrofit that blocks a required exit or reduces fire separation will fail inspection even if the structural work is correct.
ADA and building code compliance leasing
The ADA requires removal of architectural barriers where it is readily achievable. An alteration triggers accessibility upgrades along the path of travel. The 2010 ADA Standards and state amendments control the details.
California adds the Certified Access Specialist program. Civil Code Section 1938 requires a commercial lease disclosure about whether the premises has been inspected by a CASp.
Before signing in Florida, a tenant should check for building code violations under the Florida Building Code and ask for the certificate of occupancy, open permits and any notice of violation.
Example: a soft-story retail building in Los Angeles
A landlord owns a 1960s wood frame building with ground-floor retail and tuck-under parking. The city orders a retrofit under its soft-story ordinance, and the landlord carries the project through engineering evaluation, plan check, permit and inspection.
Soft-Story Retrofit Compliance Steps
- Commission ASCE 41 evaluation or FEMA P-154 screening
- Obtain stamped scope and construction estimate
- Review lease for cost recovery and relocation
- Pull alteration permit and complete structural work
- Record compliance and update seismic disclosure
Federal tenants and GSA leasing rules
A GSA lease can require the building to meet seismic performance standards. GSA screens existing buildings for seismic risk, and the evaluation behind that screening is usually prepared under ASCE 41. The lease may place the retrofit cost on the landlord, and security standards and tenant improvement allowances add further capital.
Landlords near federal offices should review GSA leasing rules before bidding.
Industrial buildings on freight corridors
Warehouses on freight corridors face different seismic risks. Tilt-up concrete wall buildings often need roof-to-wall anchors and wall bracing. Older unreinforced masonry warehouses need similar treatment.
In the Inland Empire, Dallas and Atlanta, retrofit cost competes with clear height, dock ratio and escalation terms. For owners weighing a retrofit, freight corridor industrial leasing decisions turn on those numbers.
Tax treatment under Section 179 and cost segregation
Section 179 can cover qualified improvement property, but the definition excludes the internal structural framework. Many seismic retrofits touch that framework.
A cost segregation study can reclassify certain components, such as roof anchors or mechanical attachments, into shorter recovery periods. A repair analysis under the tangible property regulations may also apply. Owners should review how the IRS treats Section 179 and cost segregation before committing capital.
