If you own a condo or townhome in California, there's a state law affecting your building right now, even if you have zero plans to sell. It's called SB 326, and it requires many condo and townhome communities to inspect their balconies and elevated walkways, then budget and plan for any repairs.
Some buildings don't qualify. Some have already handled it. And some have unfinished inspections, big repair costs, or messy paperwork that can make them hard, or even impossible, to finance.
I'm Keri White, a real estate agent here in Los Angeles, and in the last year I've personally worked through more than six different SB 326 situations. In most of them, I was the only person involved who had any prior knowledge or experience with this law. That tells me something important: most owners simply don't know what they don't know.
By the end of this article, you'll understand what SB 326 actually is, how it can block a loan, and what you should be asking your HOA right now so your building doesn't become the next horror story.
What SB 326 Actually Is
SB 326 was drafted and passed in direct response to the 2015 balcony collapse in Berkeley, which killed six students and injured seven others. Investigators traced the failure to water intrusion that had quietly rotted the structural framing inside the balcony over time. The law exists to prevent that from happening again by mandating periodic inspections of elevated structures. Berkeley's tragedy led to two related laws: SB 721 for apartments, and SB 326 for condos. And most owners have never even heard of it.
If you live in a condo or townhome community with three or more attached units, and your HOA is responsible for the building's exterior, there's a good chance this law applies to you. SB 326 requires associations to inspect what are called "exterior elevated elements," meaning balconies, decks, and walkways that are typically more than about six feet off the ground and supported by wood or wood-framed structures.
A concrete slab at ground level usually isn't what this law is aimed at. A patio over a garage doesn't count either. But if you walk out onto a balcony that projects from the building and is supported by wood framing, that's exactly the kind of structure this law targets, and there are a lot of buildings in that category.
The process has a few key parts: determining whether the building qualifies, the inspection itself (done by a licensed professional), a written report detailing what was found, a plan and funding source for any needed repairs, and documentation tying it all together.
Why This Matters Even If You're Not Selling Tomorrow
Lenders and insurers are now factoring these reports into whether they'll finance or insure a building. Insurance, in particular, is being significantly impacted by this.
Buildings that haven't completed the inspection, that have large unfunded repairs, or that have sloppy documentation can end up flagged as higher risk, or even non-warrantable. In practice, that means fewer loan options, more cash required from buyers, and a smaller pool of people who can actually purchase in your building when the time comes.
When "The Balconies Are Fine" Wasn't Actually True
I sold a condo last year in a very large building, over 100 units, with great reserves and a building that had recently spent $140 million on upgrades. Everything looked solid going in.
We got into escrow, and the lender started asking pointed questions about SB 326 compliance. I had already asked the HOA about this and been told there were no issues. But it turned out the HOA had a report the owner didn't even know existed. Once that report reached the lender, everything changed. There were outstanding repairs. Was the work budgeted? What would it cost the buyer? We suddenly needed a lot more information, fast, with the closing timeline and the buyer's rate lock both on the line.
The HOA did what most HOAs think is sufficient: they sent over the inspection report, termite reports, and repair documentation. Everyone kept saying the balconies were fine. The lender didn't find it fine.
We tracked down the HOA and property managers and worked through it with a patient buyer. The buyer's agent and I called around to previous buyers in the building to figure out which bank had financed those purchases. It turned out to be Citibank, one of the stricter lenders, and they were able to step in and finance this loan too. The escrow closed 30 days late, after negotiating rate lock extensions and credits, and after a lot of managing expectations on both sides. These situations are genuinely difficult because so much of the outcome is out of your hands. You're at the mercy of what documentation you can actually get and what the lender will accept.
When a Report Said "Immediate Action Required" in Red
Another deal this year hit a similar wall, but from a different direction. This wasn't from a lack of asking. It was from the HOA simply not providing the documents to owners in the first place.
Three weeks into escrow, right as we were closing in on building and loan approval, the lender called. They'd just received the SB 326 report, and it flagged serious findings: termite damage, framing concerns, and multiple items marked "Immediate Action Required" and "Repairs Required ASAP," highlighted in red. The loan was denied.
My buyers had fought off multiple competing offers and searched for six months to find this townhome. They were devastated.
We went looking for other lenders. Some could finance the property, but only with a rate a full point higher, or with an extra 10% down. Neither was workable. This is exactly what happens when SB 326 issues stay open: it hits both the building's value and its insurability.
So the listing agent and I worked a plan B. We dug into how much of the flagged work had actually already been completed. And here's where it turned: some of it had been done. We just had to prove it.
We went through the report line by line and asked three questions: what work had already been completed since the report was issued, what documentation existed for that work, and which items were still open, with what timeline. Everyone's attention had gone straight to the red highlighted sections, but nobody actually knew which of those items were still outstanding versus already resolved. The report captured a moment in time. It didn't mean those same problems still existed in the present.
Once we separated "already fixed" from "still a concern," the lender and buyer could evaluate the real risk instead of the worst-case scenario on paper. The real ask wasn't for paperwork that existed somewhere. It was proof: show the repairs, then show documentation tying those repairs to the original findings.
We worked with the relevant parties to document what the inspector originally found, what work had actually been completed, and a clear statement connecting the two. After a two week delay and a lot of follow-up, pressure, and negotiation, we handed the lender a completed repair report. The bank signed off, and escrow closed. Without understanding what these reports mean, what lenders actually need, and having the right people on both sides of the transaction, that purchase simply doesn't happen.
I could go on. I've even had a case where the listing agent on the other side insisted SB 326 didn't exist. She hadn't sold a property in over a year, and you can imagine how that escrow went.
Three Questions to Ask Your HOA Right Now
If you own a condo or townhome, here's what actually matters for you.
Ask your HOA or management company:
- Has our SB 326 inspection been completed, yes or no?
- Do we have the final written report, and can owners get a copy?
- What repairs are required, what's the timeline, and how are they being funded, reserves, a special assessment, or an association loan?
And one more layer worth pushing on: is there clear documentation tying the report's findings to whatever repairs have already been completed?
Buildings that have finished their inspection, have a repair plan, and keep their documentation in order stay financeable and attractive to buyers. Buildings that haven't done the inspection, are sitting on unfunded repairs, or can't tell a clear story on paper risk becoming non-warrantable, which means fewer loan options and more friction every time someone tries to sell.
Don't Let This Quietly Chip Away at Your Equity
If you're reading this and realizing you have no idea where your building stands with SB 326, you're not alone. Most owners I talk to haven't seen the report, don't know what repairs are planned, and have no idea how any of it affects a future sale or refinance. But this is exactly the kind of thing that can quietly erode your equity if it's ignored long enough.
If you want help making sense of your building's situation, send over your HOA docs, your SB 326 report, or whatever you have, and I'll walk you through what it actually means for your unit and your next move.
And if you're planning a move and want a team that actually understands this stuff, Human Element Real Estate is here for you. Reach out for a quick call and we'll walk through how to prep your move.
