Buying Condos and Townhouses

Condominiums have made homeownership affordable for many people. This is particularly the case on the Westside of Los Angeles, where the prices of single family residences are prohibitive to even the most well heeled professionals. There are however many things to consider when buying a condo in these areas:

Earthquake Insurance
Approximately half of all condominium and townhouse buildings on the Westside have earthquake insurance included in the homeowner’s dues.

This protects the owners from having to come up with funds to pay for repairs, should an earthquake occur.
Price of construction per square foot in Santa Monica, Brentwood and other Westside neighborhoods can be anywhere from $150-300. This makes a complete rebuild on a 1000sf condo at the very least $150,000 up to $300,000

Often the insurance provides funds for replacement housing should the homeowners need to move out during reconstruction. Some, not many, buildings were completely torn down and rebuilt after the Northridge Earthquake in 1994. So no matter what the deductible, these buildings were happy to have had earthquake insurance.

Earthquake insurance can be very costly. Premiums tend to be significantly higher for buildings that are looking for new coverage as opposed to buildings who signed on for coverage 20 years ago. The deductibles can be upwards of $250 -500,000, much higher than what most buildings in Santa Monica suffered during the Northridge Earthquake in 1994.

Personal Assessment Insurance can be had for a maximum of $50,000 per condominium. You would be covered in an instance where your 10 unit condo building had $500,000 worth of damage.
The federal government often supplies subsidized loans at very low interest rates for disaster victims.
Many buildings in Santa Monica had to go through years of court action before their insurance providers would give them the financial assistance that was owed to them.

Earthquake Insurance FAQ’s:
All of the units in a condo building need to subscribe to the Earthquake Insurance policy. Coverage cannot be given to units on an individual basis.

Pet Policy
Most condominium buildings have a restriction on pet size. Smaller building and townhouse buildings tend to be more liberal while large buildings are more conservative.

Pet size restrictions tend to be by poundage and number of pet limits. The most common is two dogs or cats under 20lbs each. Other buildings have 30 and 40lb limits. The average Labrador is over 40lbs.
If you have a pet or plan on getting one make sure you read the CC&R’s on pet restrictions. The CC&R’s are the rules that govern the Homeowners Association.

Pet Policy FAQ’s:
If a homeowner breaks the rules with regards to pet size or number the pet will be mandated to leave the building. If the pet does not leave the HOA can place liens on the property and or force court action to have either you or your pet forbidden entry.

There is a new law in Los Angeles that requires Homeowner’s Associations that change their CC&R’s to allow at least one pet per owner– effectively making it illegal to restrict owners from having pets. The only way to avoid this is for the complex to leave their CC&R’s untouched.

Many people enjoy the idea of amenities such as pools, sauna, 24 hour guard gated access. For many residents of these buildings these amenities never become truly valuable. There are thousands of residents of local condo buildings who use the building pool about once a year. Additionally, in Santa Monica and Brentwood there are many local gyms that do a better job of motivating you. So, if you are going to buy in a building with amenities, and therefore higher homeowners dues and purchase prices, make sure you are going to take full advantage of them.

I should also mention that if you are looking to live in a luxury building; say an ocean view condominium on Ocean Avenue, none of the above applies. You are going to have amenities whether you like them or not and enjoy using or not using every minute of them.

After the Homeowners Dues are collected and used to pay debits to the different vendors the left over money is put into reserves for the building. Funds from the reserves can be used in case the building needs a new roof or upgrades to the hallways and common areas.

Difference between a Condo and a Co-op
In a condominium, the owner owns the space inside the walls individually and the common areas collectively as part of a group. It is a pure form of homeownership, with the same rights and responsibilities of a single family home. A co-op is owned by a cooperative that issues shares to the building and the right to occupy a given unit. As the owner, you own shares in the building not the space inside the walls. Your right to occupy a particular section of the building is usually issued via a lease term that renews every fifty years or so. About 95% of the multi-unit inventory in Los Angeles (Brentwood) and Santa Monica is condos. In New York City the majority of units are co-ops. The difference between buying a condo or a co-op in Santa Monica and Los Angeles is that buyers of co-ops tend to have less financing options available to them. You also have to be”approved” by the board. Here on the Westside the boards are pretty liberal in contrast to the stories you might have heard about New York City co-op boards.

Difference Between a Townhouse and a Condo
In Santa Monica and the other neighborhoods of the Westside of Los Angeles, people refer to single story residences as condos and double or triple story residences as townhouses. These are both condominiums in the legal sense of the term.

TORCA Conversions
TORCA stands for Tenant Ownership Rights Charter Amendment which exists only in the City of Santa Monica. If a condominium or townhouse property is a TORCA conversion and is tenant occupied by the original tenant, you may not be able to get rid of the tenant unless they leave of their own free-will.
Back in the mid-1980’s local landlords were able to get the City to allow conversions of their apartment buildings to condominiums. Many landlords appreciated this because the strict Santa Monica Rent Control laws made it an often unprofitable experience for these property owners. Under this agreement the landlords had to offer the properties for sale first to the tenants. If the tenants declined to make the purchase they were allowed to stay in the unit indefinitely. One of the reasons why there are so many TORCA conversions with tenants still occupying the property is because the city allowed these original tenants to also keep the old antiquated Santa Monica Rent Control. This older version is similar to what they have in New York City, where the tenants pay an exceptionally low rent in comparison with what the market will allow for.

A TORCA property can be sold by an owner even if it is occupied by the original rent control tenant. However, the new owner wil be subject to the same laws that governed the ownership by the previous owner and will not be able to get the old tenant out unless they leave of their own free will. For many of these long-term tenants, their rent controlled home is the only thing in their lives that give them a feeling of security. It is often a very serious part of their identity. Because of this, many of them, even when offered tens of thousands of dollars, will not leave.

If you are considering buying a property with a TORCA tenant, you may want to make it a contingency of the sale that it is delivered vacant of the tenant.

Please note that the new Santa Monica Rent Control is very similar to what you find in the rest of the City of Los Angeles, and is not something to be terribly worried about. Additionally, a TORCA conversion that is tenant occupied, but not by the original tenant, from the conversion period, is not under the same rules and regulations. There is nothing wrong with buying a TORCA conversion if you don’t have the orginal tenant. In fact, about 80% of the properties in Santa Monica under $700,000 are TORCA conversions and are virtually free of any major encumberances.

City of Santa Monica Web-site
For more specific details and/or legal advice on TORCA conversion here is the Attorney who helped write the TORCA laws. You can ask for Paul De Santis or Rick Mills. They also represent real estate for sale, but their specialty is as lawyers:
Paul C De Santis Law Offices
1301 Montana Ave # D
Santa Monica, CA 90403
(310) 451-1070‎