Reinforced concrete shear walls constructed before modern earthquake codes pose significant risks under earthquake loads due to the use of smooth reinforcement bars, inadequate embedment lengths, and low-strength concrete. In such substandard systems, rapid deterioration of the steel–concrete bond pushes the pre-collapse limit states to an earlier stage beyond current code predictions. However, modern earthquake codes such as TBEC, fib2010 and ASCE/SEI41 use calibrated equations for deformed/ribbed reinforcements and idealized bond conditions, which conflicts with realistic performance evaluation of these systems. In this study, based on experimental data, a new pseudo-steel material model is proposed and implemented in a numerical framework to simulate both elastic-plastic behavior and bond-slip effects of smooth bars in substandard shear walls. The model includes empirical reduction factors for elastic stiffness, post-yield hardening, and yield strength to realistically captures slip failure mode by directly integrating bond loss into the steel stress-strain relationship. The numerical models reproduced moment–chord rotation envelopes of tested specimens with high accuracy. Additionally, collapse prevention limits defined in modern codes were compared against experimental and numerical results showing that all codes significantly over-predicted the ultimate chord rotation for substandard shear walls. These deviations are primarily due to the idealized assumptions of the codes such as steel post-hardening, confined concrete strength, and overvaluation of post-yield rotations. Therefore, this study proposes a modification to the collapse prevention formulation in the Turkish code to match the actual behavior of substandard shear walls. The proposal redefines the plastic hinge length as one-third of the wall length, and adding a correction term reflecting plastic reinforcement slip. The revised formulation limited the prediction of the ultimate chord rotation to a more realistic value of 1%, offering a more reliable framework for assessing the seismic performance of existing nonconforming reinforced concrete shear walls.