SB 326 Balcony Reports and Your California Condo Sale
For sellers in qualifying CA condo buildings, your HOA's SB 326 balcony inspection report is a required part of the resale disclosure package. It can delay escrow.
Key takeaway: For sellers in qualifying California condo buildings, your HOA's SB 326 balcony inspection report is now a required part of the Civil Code §4525 resale disclosure package. A missing or problematic report can delay your escrow.
The initial deadline for SB 326 inspections—January 1, 2025—has passed. For real estate agents and homeowners, this means the law has shifted from a future concern to a present-day compliance issue. The focus is now on the ongoing nine-year inspection cycle and how the resulting reports impact the sale of a condo unit. This is not just an HOA maintenance document; it's a critical seller disclosure.
Which Condos Are Subject to SB 326 Inspections?
The SB 326 inspection requirement applies to condominium common-interest developments with three or more attached units that have "exterior elevated elements." These are structures like balconies, decks, stairways, and walkways that are more than six feet above the ground and substantially supported by wood or wood-based products. The statute governing this is California Civil Code §5551.
This law does not apply to all condos. Buildings constructed primarily of concrete or steel, or communities of detached single-family homes, are generally excluded. The focus is squarely on multi-unit structures where moisture intrusion could compromise wooden support systems over time.
This is especially relevant in the South Bay and Westside Los Angeles. Many condo complexes in Manhattan Beach, Hermosa Beach, and Redondo Beach were built with wood frames and feature extensive balconies and walkways to take advantage of the coastal views. These are precisely the types of buildings the law targets.
What Does the SB 326 Inspection Report Include?
The SB 326 inspection report is a formal document prepared by a licensed architect, civil engineer, or structural engineer. A general contractor cannot perform this inspection. The report must provide a thorough assessment of the building's exterior elevated elements.
The inspector performs a visual examination and, if necessary, may conduct further testing on a statistically significant sample of elements to check for hidden damage. This can involve opening up structures to evaluate the condition of framing and waterproofing.
The final written report must contain specific information:
| Report Component | Description |
|---|---|
| Current Condition | An evaluation of the physical condition and performance of the elements. |
| Immediate Hazards | Identification of any condition that poses an immediate threat to safety. |
| Expected Useful Life | The inspector's professional opinion on the remaining lifespan of the structures. |
| Recommended Repairs | A list of any recommended repairs, whether immediate or for future planning. |
If a report identifies an "immediate threat to the safety of the residents," the HOA is required to take immediate preventive measures, such as restricting access to the hazardous area, and begin repairs.
How Does the Inspection Report Affect a Condo Sale?
The inspection report directly impacts a condo sale because the HOA must provide the most recent report as part of the document package requested during escrow. Under California Civil Code §4525, a seller must furnish a prospective buyer with a trove of HOA documents, and the §5551 inspection report is now one of them.
For a seller, this means:
- Disclosure is Mandatory: You must provide the report if the HOA has one. A buyer's agent will and should demand it for any qualifying property.
- Negotiation Point: If the report reveals significant deferred maintenance or upcoming special assessments to pay for repairs, a buyer will likely use this information to negotiate the price or request credits.
- Escrow Delays: If the HOA has not completed its inspection or cannot produce the report in a timely manner, it can delay the transaction. We see this firsthand in deals from Playa Vista to Palos Verdes; buyers and their lenders want all disclosure documents reviewed before removing contingencies.
A clean report can be a selling point, demonstrating that the HOA is well-managed and the building is structurally sound. Conversely, a report detailing problems can complicate or even kill a deal.
What is the HOA's Ongoing Inspection Process?
The ongoing inspection process for SB 326 requires HOAs to complete a comprehensive inspection cycle every nine years. This is not a one-time event but a recurring legal obligation. For an HOA board, the process looks like this:
- Hire a Professional: The board must engage a licensed architect or engineer to perform the inspection. This should be done well in advance of the nine-year deadline to allow for scheduling.
- Facilitate the Inspection: The inspector will need access to the property and potentially inside some units to fully evaluate the exterior elements.
- Receive and Review the Report: The board receives the final written report. The report must be incorporated into the HOA's reserve study, and any required repairs must be addressed.
- Fund and Perform Repairs: If the report calls for repairs, the HOA must fund and complete them. Immediate hazards require immediate action.
- Maintain Records for Disclosure: The HOA must keep the report as part of its official records to be provided to sellers for their disclosure obligations during a future sale.
As a seller, it's wise to ask your HOA for the status of its SB 326 compliance as soon as you are thinking of listing your property. Having this information upfront prevents surprises during escrow.
FAQ
Is SB 326 the same as the SB 721 apartment law?
No. SB 326 applies to condominium projects managed by a common interest development (HOA). The sister bill, SB 721, applies to apartment buildings with three or more units and has similar requirements but is the responsibility of the building owner, not an HOA.
Does the seller order the SB 326 inspection?
No, the HOA is the entity responsible for commissioning and paying for the building-wide inspection. The individual unit seller's responsibility is to obtain the most recent report from the HOA and include it in their resale disclosure package for the buyer.
What happens if the report finds an "immediate safety hazard"?
The inspector must notify the HOA and local code enforcement agency immediately. The HOA is legally obligated to take action to prevent access to the dangerous area and begin repairs. For a seller, this is a material fact that must be disclosed and will almost certainly need to be addressed before a sale can close.
Why does this matter for coastal South Bay buildings?
This matters greatly because SB 326 specifically targets structures supported by wood or wood-based products. Coastal buildings in cities like El Segundo and Santa Monica are constantly exposed to salt air and moisture, which accelerates the deterioration of wood framing and waterproofing systems. These are the exact conditions the law was designed to catch.
Can we close escrow without the balcony report?
Closing without the report is a significant risk. If an SB 326 inspection has been completed by the HOA, the resulting report is a required part of the seller's disclosures. Failing to provide it can expose the seller to liability after the sale. Prudent buyers and their agents will not allow the transaction to proceed without reviewing it.
Managing the disclosures for a condo sale, especially with these added complexities, requires an expert title and escrow team. If you're preparing to buy or sell a condo in the South Bay or Westside, contact us. We'll ensure your transaction is handled with the diligence it deserves. Give Matt Goeglein or Xavier de la Piedra IV a call.
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