Over 13,500 wood-frame apartment buildings in Los Angeles were identified as requiring soft story seismic retrofits under the City’s mandatory program. The compliance deadline for most buildings was December 2022. Buildings that have not completed the retrofit carry an open Compliance Order from LADBS. If you own one of those buildings and are considering a sale, here is exactly how the open order affects your transaction.

What the Soft Story Retrofit Requirement Actually Is

A soft story building has a ground floor with large openings, including tuck-under parking, storefronts, or open lobbies, without adequate shear walls to resist lateral seismic forces. During the 1994 Northridge earthquake, soft story buildings collapsed at a significantly higher rate than other structures. The City responded with Ordinance 183893, requiring mandatory seismic retrofits for all wood-frame soft story apartment buildings.

The retrofit installs steel moment frames, steel column moment frames, or plywood shear walls within the weak ground floor. Tenants do not need to vacate the building during construction, though parking disruptions are common. LADBS publishes all open compliance orders at ladbs.org under the property address. Check it before listing.

The requirement applies only within the City of Los Angeles. Buildings in Burbank, Glendale, West Hollywood, Beverly Hills, Santa Monica, and unincorporated LA County operate under different programs.

How Buyers Price a Building With an Open Compliance Order

Buyers who are willing to purchase with an open compliance order subtract their full estimated cost from the price they otherwise would have paid. They do not subtract the retrofit cost alone. They apply a 20 to 30 percent premium on top of the actual estimated cost to account for scope uncertainty, permit delays, and the risk of taking on an unknown regulatory obligation.

Value-add buyers are the most active buyer category for compliance-burdened LA apartment buildings. They are already planning significant capital expenditure and underwrite the retrofit as one of several known costs alongside deferred maintenance and unit renovations. Conventional buyers and buyers using agency financing are significantly less likely to accept an open compliance order.

The Financing Complication You Need to Understand

An open LADBS Compliance Order prevents most conventional agency financing for the buyer. Fannie Mae and Freddie Mac require all open code violations to be resolved before funding. An uncompleted mandatory seismic retrofit is classified as an open code violation.

This eliminates a substantial portion of the buyer market. The remaining pool consists of all-cash buyers, portfolio lenders at community banks and credit unions, 1031 exchange buyers with sufficient proceeds from their downleg sale, and hard money lenders at significantly higher rates. A smaller buyer pool means fewer competing offers and less price competition. The financing restriction is the most direct financial impact of the open compliance order on your sale, not the retrofit cost itself.

Disclose Upfront and Provide Contractor Bids

The compliance order is a public record. Every experienced buyer’s broker searches LADBS within 24 to 48 hours of an accepted offer on any pre-1980 LA building. They search the soft story compliance record, open permits, code enforcement orders, SB 721 inspection status, and certificate of occupancy. A compliance order that was not disclosed or was described inaccurately gives buyers grounds to renegotiate price or cancel using the due diligence contingency.

The strategy that produces the cleanest sale: disclose the compliance order clearly in the offering memorandum, include the LADBS compliance record in the due diligence package, and provide two to three contractor bids for the retrofit work. Buyers who know exactly what they are buying and exactly what it will cost discount less aggressively because they have already priced it in.

For more on how compliance issues affect LA multifamily sales, read our guide on new LA multifamily regulations taking effect in 2026.

For SB 721 balcony inspection compliance, which buyers also check in due diligence, see our breakdown of SB 721 balcony inspection requirements.