SB 721 vs SB 326: California Balcony Inspection Laws and Your Mortgage

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. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. Call (800) 239-1103.

California has two balcony inspection laws, and buyers mix them up constantly. SB 721 covers rental apartment buildings. SB 326 covers condominiums and other HOA communities. Both came out of the 2015 Berkeley balcony collapse, both target wood-supported balconies, decks, stairs and walkways, and both can show up in your loan file — but in different ways.

If you’re buying a triplex, fourplex or larger apartment building, SB 721 is the one that matters. If you’re buying a condo, it’s SB 326. Here’s how each works and how I finance around them.

SB 721 vs. SB 326 at a Glance

What SB 721 Requires of Apartment Owners

• Who’s covered: buildings with three or more rental units that have exterior elevated elements supported in whole or substantial part by wood. Duplexes aren’t covered.
• Deadline: the first inspection was due by January 1, 2026, after AB 2579 extended the original 2025 date. Buildings permitted more recently follow a schedule tied to their certificate of occupancy.
• Frequency: every six years after that.
• Immediate hazards: if an element poses an immediate threat to safety, the owner must restrict access right away, and the inspector reports it to local code enforcement.
• Repairs: non-emergency repairs must be permitted and completed on deadlines set in the statute (120-day windows), and local agencies can impose civil penalties of $100 to $500 per day when owners don’t comply after notice.

How SB 721 Affects Financing an Apartment Building

Lenders don’t have a single “SB 721 rule.” Instead, the inspection report, or the lack of one, becomes a property condition issue that the appraiser, underwriter or commercial due diligence will pick up:

2–4 Unit Properties

Triplexes and fourplexes are usually financed with conventional, FHA or VA residential loans — including owner-occupied purchases. The appraiser reports on the property’s condition, and safety-related defects on stairs or balconies typically must be fixed before an FHA or VA loan can close. Ask for the SB 721 report early so repairs can be negotiated with the seller.

5+ Unit Buildings

Buildings with five or more units are financed with commercial loans. SB 721 findings show up in the property condition report, and lenders may require a repair escrow, a remediation plan from the owner, or completed repairs before closing.

Investor Loans

DSCR and portfolio lenders review SB 721 findings case by case. For non-structural findings with a documented plan, some will close with a holdback. For structural issues, a short-term bridge loan to buy and repair, followed by a refinance, is often the cleanest route — see bridge loans.

What to Request Before Making an Offer

• The most recent SB 721 inspection report (and whether it was completed by the deadline)
• Any notices from the local building or code enforcement department
• Bids, permits and timelines for any repairs
• Whether any balcony or stairway is currently closed or restricted

If the inspection was never done, you’re taking on that obligation — and possibly a lender condition — with the building. Price it in.

Buying a Condo? SB 326 Is the Law That Matters

SB 721 doesn’t apply to condominiums. For condo buyers, the relevant law is SB 326, and the financing impact is bigger because it affects the whole project’s eligibility. An HOA’s SB 326 report that identifies unrepaired structural deficiencies can make the building ineligible for Fannie Mae until the work is done, and special assessments to pay for repairs must be documented by the lender. Since August 3, 2026, Fannie Mae’s Limited Review is gone, so most condo buildings of 11 or more units get a Full Review that looks at these issues directly.

Before you make an offer on a condo, ask the HOA:

1. Has the SB 326 inspection been completed, and can I see the report?
2. Were any deficiencies found, and are repairs funded and scheduled?
3. Has a special assessment been levied or proposed for the repairs?
4. Is the HOA in any litigation over construction or repairs?

Details in my SB 326 condo mortgage guide and non-warrantable condo guide.

Frequently Asked Questions

Does SB 721 apply to condos?

No. SB 721 applies to rental buildings with three or more units and excludes condominiums and other common interest developments. Condo buildings are covered by SB 326, which requires the HOA to handle inspections.

What is the SB 721 inspection deadline?

The first inspection was due by January 1, 2026, after AB 2579 extended the original January 1, 2025 deadline. Inspections are then required every six years.

Does SB 721 apply to duplexes and triplexes?

It applies to buildings with three or more dwelling units that have wood-supported elevated elements more than six feet above ground. Duplexes are not covered; triplexes, fourplexes and larger buildings are.

Can I get a loan on an apartment building with SB 721 repairs needed?

Often, yes. Minor findings may be handled with repairs before closing or a repair holdback. Structural findings usually need to be repaired and signed off first, and a bridge or portfolio loan can fill the gap.

What is the difference between SB 721 and SB 326?

SB 721 covers rental apartment buildings and puts the inspection duty on the owner, with inspections every six years. SB 326 covers condo HOAs, puts the duty on the association, and requires inspections every nine years. SB 326 has the bigger mortgage impact because it affects condo project eligibility.

Related Resources

• SB 326 Condo Mortgage Guide
• Non-Warrantable Condo Mortgages
• Fannie Mae’s August 2026 Condo Rule Change
• DSCR Loans in California
• Commercial Loans in California
• Bridge Loans in California