Hundreds of San Francisco residential building owners have yet to comply with the city’s mandated seismic retrofit program and face penalties if they don’t initiate the safety improvements in the next 60 days, according to the Department of Building Inspection.

With a Sept. 15 deadline looming, nearly 61 percent of “Tier 2” buildings — wood-frame structures of 15 units or more — have yet to submit the permits needed to comply with the 2013 law. That means that out of 576 buildings in the category, 349 have not initiated the process of coming into compliance.

Department of Building Inspection Director Tom Hui said he is surprised at how many property owners have not taken steps to bring their buildings into compliance.

“There are always going to be people in denial stage, who do things at the last minute, but it’s more than what I expected,” he said.

The mandatory retrofit program, meant to keep roughly 5,000 multiunit structures standing during the next serious quake, applies to wood-frame buildings with weak ground-floor conditions, such as a garage space or an open-window retail space. It applies to buildings constructed before 1978 that are at least three stories tall and have at least five units.

The buildings are split into four categories, with retrofitting spread over the next few years. The first retrofits must be completed by 2017 and the last by 2022. Tier 2 property owners have until 2018 to complete the work. The other tiers include public buildings, smaller apartment buildings, structures with a ground-floor commercial use and those that are located in a mapped liquefaction zone.

After Sept. 15, Tier 2 property owners who haven’t submitted plans will get a big placard stating “Earthquake Warning” slapped on the side of their building. If the property owner still doesn’t apply for a permit, the owner will be called in for a “director’s hearing” to explain why. After that, the city will start fining the property owner for code violations, a lien could be placed on the property, and the case could be referred to the city attorney for legal action.

While Hui said noncompliance “would not be good news for the landlord,” he emphasized that the city isn’t interested in collecting penalties.

“We want the property owners to do the work to make the building safe — we don’t want to make money out of this,” he said. “People always ask me when the next earthquake will happen. I always say, ‘One hour from now.’”

The program has created a cottage industry for soft-story seismic specialists, as thousands of property owners scramble to get work done. One such company, the SF Garage Co., has 20 soft-story projects going at any one time and has a waiting list of 80 more buildings, said owner John Pollard.

Plenty of business

On a whiteboard at his Mission Street office, Pollard has dozens of addresses of San Francisco apartment buildings written in red and black. Since the legislation took effect, Pollard’s staff has grown from 23 to 100 workers, including engineers, carpenters, electricians, plumbers and painters.

A soft-story retrofit costs between $100,000 and $1 million — depending on the condition and size of the building. The average is between $300,000 and $500,000. It takes about two weeks and generally consists of a steel “moment frame” being added to both the front and back of the building, “which prevents it from tipping over left to right,” Pollard said.

But many of Pollard’s clients are doing more than a soft-story retrofit and adding new housing units, thanks to legislation by Supervisor Scott Wiener that allows buildings in the soft-story program to convert ground floor or basement spaces into housing units. Suddenly, buildings across the city are digging out basements and garages and laundry rooms and turning them into accessory dwelling units, more commonly known as in-law units.

“All of our clients are focused on adding the ADUs — we have four architects cranking out designs” Pollard said. “If you think about it, you might get $250 a month for a parking space. A good-sized studio might get $2,100 or $2,200.”

Property owners are spending about $100,000 per unit for an in-law unit, Pollard estimated, and they will be subject to rent control and more affordable than typical apartments because they tend to be smaller with fewer amenities.

Charley Goss of the San Francisco Apartment Association, which represents rental property owners, said that some owners may be procrastinating because of the cost of the retrofit, but that members of his organization support the program and will eventually comply.

‘Hesitation’ by owners

“It’s a little discouraging that the number of noncompliance is that high,” Goss said. “Certainly there is an economic aspect to it — it’s going to cost them a lot of money. There is a hesitation to take that on. And it’s definitely triggered some building sales by some of our members who felt they couldn’t finance the work.”

Landlord Ken Mieslan, who owns more than half a dozen buildings, said he is adding more than 10 accessory dwelling units to his portfolio.

“I think that the retrofit program is absolutely the right thing to do. It benefits the tenants. It will save lives in an earthquake. It will save properties when the big one hits,” he said. “The seismic work itself should be done whether you have ADUs or not, but the ADU is a smart incentive.

Wiener said he expects that most property owners will file right before the deadline and anticipates that the pace will pick up once word of the ADU provision spreads.

“I think we will see a rush over the next 60 days,” Wiener said. “We are requiring people to perform expensive work — to retain an architect and contractors and go through a planning process. Why not allow them to add one or two in-law units while they are at it? My view is it’s working. It’s doing exactly what we intended it to do.”

J.K. Dineen is a San Francisco Chronicle staff writer. Email: jdineen@sfchronicle.com

Twitter: @sfjkdineen