SB 326 and Palm Springs Condos: Leased Land + Balcony Inspection — The Double Challenge

Palm Springs is one of California’s most condo-dense real estate markets — and it now sits at the intersection of two of the state’s most complex mortgage financing challenges: SB 326 balcony inspection compliance and Indian leased land financing. I’ve helped buyers navigate both of these separately, and increasingly I’m seeing them hit the same property at the same time. Most lenders have no idea how to handle either one, let alone both at once. I’m Michael DiVita — DRE #01818285 | NMLS #323700, DiVita Home Finance. We do. Call (800) 239-1103.

Why Palm Springs Has Outsized SB 326 Exposure

Palm Springs has a uniquely high concentration of condo inventory relative to single-family homes — driven by the city’s resort character, second home market, and active adult communities. Many of these condo buildings were constructed in the 1960s, 1970s, and 1980s during Palm Springs’ mid-century development boom. This building stock is now 40–60 years old, and decades of desert sun, heat, and occasional moisture have taken a toll on structural elements — precisely the conditions SB 326 was designed to surface.

Balconies, elevated walkways, and exterior stairs in older Palm Springs condo complexes are showing dry rot, structural fatigue, and water intrusion when properly inspected. Many HOAs are discovering SB 326 problems they didn’t know existed — and the financing disruption is immediate.

The Leased Land Layer

Roughly half of Palm Springs sits on Indian leased land — land owned by the Agua Caliente Band of Cahuilla Indians and leased to homeowners under long-term ground leases. Many Palm Springs condo developments, including some of the city’s most well-known communities, are on leased land.

Leased land condos already require a specialized lender who understands the BIA approval process and lease term requirements. Add an SB 326 non-warrantable flag on top of the leased land status, and you’ve created a financing situation that will defeat any lender without specific expertise in both areas.

The combination can look like this: a buyer finds a condo at The Springs, Canyon Villas, or another Palm Springs leased land community. The building is on Indian leased land (requiring BIA approval and a lease with 35+ years remaining) AND the HOA has an unfunded SB 326 special assessment. No conventional lender. No FHA. Limited options — but not zero options.

Financing Solutions for Palm Springs Leased Land Condos with SB 326 Issues

Portfolio Lenders with Both Specialties

The most important thing for a Palm Springs leased land condo buyer facing SB 326 issues: find a portfolio lender who is experienced in both leased land AND non-warrantable condo financing. These lenders exist, but they’re not easy to find through a standard lender search. DiVita Home Finance has relationships with investors who routinely handle exactly this combination.

Non-QM Programs

Non-QM programs are generally more flexible on both condo warrantability and property type, making them a viable alternative for leased land condo situations with SB 326 complications. Expect rates 1.50–2.00% above conventional for this combination.

Cash Purchases and Cash-Out Refinances

For buyers with the resources, an all-cash purchase of a leased land condo with SB 326 issues bypasses both financing challenges. The property can be refinanced later when warrantable status is restored. This is genuinely the cleanest solution when resources allow.

What to Check Before You Buy a Palm Springs Condo

1. Is it leased or fee land? Your agent and we can verify this within minutes. This affects your entire financing strategy before you add SB 326 to the equation.
2. If leased, how many years remain on the ground lease? You need 35+ years remaining for a 30-year mortgage.
3. Has the HOA completed its SB 326 inspection? Request the inspection report from the HOA or seller before making an offer.
4. If inspection is done, were any deficiencies found? If yes, are repairs funded? Is there a special assessment?
5. What’s the HOA reserve fund level? With the August 3, 2026 Fannie Mae rule change, reserve adequacy is now a financing factor even for buildings otherwise SB 326 compliant.
6. Call us before going under contract. We’ll tell you in minutes what financing options exist for the specific building and lot type.

Palm Springs Condo Communities Commonly on Leased Land

Many of Palm Springs’ established condo communities sit on Agua Caliente leased land, including developments in the Sunrise Park, Movie Colony, Deepwell, Tahquitz River Estates, and Golf Club neighborhoods, among others. The “checkerboard” pattern means adjacent buildings can be different — always verify before assuming.

Frequently Asked Questions: SB 326 + Leased Land Palm Springs