California SB 721: How the Apartment Balcony Inspection Law Affects Investment Property Financing

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. Call (800) 239-1103.

Most buyers know about SB 326 — the California balcony inspection law for condo HOAs. Far fewer know about SB 721, its companion bill for rental apartment buildings. SB 721 requires owners of multifamily buildings with three or more residential units to inspect exterior elevated elements (balconies, decks, stairways, walkways) by January 1, 2025, and every six years thereafter. If you’re buying a small apartment building in California — a duplex, triplex, fourplex, or larger multifamily — SB 721 compliance is a lender issue you need to understand before you’re in contract.

SB 721 vs. SB 326: The Key Differences

How SB 721 Affects Your Investment Property Mortgage

When you purchase a California apartment building, lenders review the property’s condition as part of underwriting. If the property has open SB 721 violations — meaning the inspection was completed and deficiencies were found but not repaired — lenders treat this similarly to any material deferred maintenance finding. Conventional lenders (Fannie Mae/Freddie Mac) on 2–4 unit investment properties may require the violations to be remediated before funding. Some lenders will escrow funds for the repairs and close subject to completion.

For larger apartment buildings (5+ units) financed with commercial loans, SB 721 findings will surface in the property condition report and Phase I due diligence. Lenders may require a repair escrow, a letter from the property owner confirming a remediation plan, or in severe cases, completion of repairs before closing.

What to Request Before Making an Offer on a California Apartment Building

Before submitting an offer on any California multifamily building with 3+ units, request: the SB 721 inspection report (the seller is not required to proactively disclose but must respond to a direct request), any violation notices issued by the local building department, the owner’s repair timeline and cost estimates if deficiencies were found, and written confirmation from the seller as to whether the January 2025 inspection deadline was met. If the inspection was never performed, you’re acquiring potential liability — and a lender condition — along with the property.

Financing Options When SB 721 Findings Are Present

DiVita Home Finance works with DSCR investors and portfolio lenders who review SB 721 findings on a case-by-case basis — similar to our approach with SB 326 condo projects. For investment properties where the SB 721 findings are non-structural (waterproofing, surface repairs) and the owner has a documented repair plan, select lenders will close with an escrow holdback rather than requiring completion before funding. For properties with active safety restrictions or structural findings, the bar is higher — but not automatically a deal-killer if the right investor is involved from the start.

See also: SB 326 and Condo Financing →

See our full SB 721 California Mortgage guide for inspection timelines, lender responses, and financing solutions.