Owners to Abandon Red-Tagged Condos : Earthquake: Citing prohibitive costs of rebuilding, residents vote to demolish the building and sell the land.

In a move that could be the precursor to other owners deserting their earthquake-damaged properties, a group of Sherman Oaks residents has voted to walk away from a red-tagged condominium complex.

Residents of the 30-unit complex in the 4600 block of Willis Avenue are believed to be the first to abandon their property because of the prohibitive cost of rebuilding. The complex was one of dozens of structures on the same street rendered unlivable by the Jan. 17 quake.

“A lot of people who lived there were on fixed incomes; there were a few young families who were just starting out,” said resident Barry Wegman, president of the Willis Palms Homeowners Assn. “There just wasn’t money to rebuild.”

Structural engineers had told residents they could rebuild at a cost of $3 million, he said.

“At first, we were thinking that it might be an opportunity for us to rebuild . . . but it was wishful thinking,” Wegman said.

Twenty-nine of the 30 residents voted to demolish the building and sell the land.

Ten residents own their units outright and are walking away from their homes. Twenty others will attempt to get lenders to excuse their mortgages, or let the lenders foreclose on their property, Wegman said.

“A couple of months from now, they may be viewed as one of many,” said Jim Lindl, a Camarillo attorney who represents 450 community associations in the Los Angeles area, of the Sherman Oaks group.

He said up to 20% of owners of damaged condominiums and apartment complexes throughout the Los Angeles area may choose not to rebuild.

“People don’t have (earthquake) insurance or they don’t have money for the deductible,” Lindl said. “People will have to take out loans that are worth more than their condo before the earthquake” in order to rebuild.

According to the Los Angeles Department of Building and Safety, 1,503 residences were red-tagged after the quake. Many owners of condemned apartment and condo complexes were given 30 days to inform the city whether they planned to repair or demolish their buildings.

Lindl said high rebuilding costs left residents with no economic incentive to rebuild, especially in the current housing slump.

Most homeowners with earthquake insurance will be required to pay an average of $2,000 to $20,000 in deductibles, Lindl said, depending on the extent of damage and the repairs associations can make themselves.

In the case of the Willis Palms complex, Wegman said the vote to leave was painful, but necessary.

“It was a tough decision from an emotional standpoint,” he said. “But once you see the damage, there was no question about it.”

He said that leaving his unit will cost him his five years of equity, but noted that those who owned their properties outright lost everything.

Richard Close, president of the Sherman Oaks Homeowners Assn., said damaged buildings turned into vacant lots will have a bad effect on the community.

“There will be a lot of empty fenced lots if people decide to do this, which is not very attractive,” Close said. “It will look like Beirut.”