How Do California’s Balcony Inspection Laws Impact Taxes for Multifamily Property Owners and HOAs?

In Brief:

• California balcony inspection laws (SB 721 and SB 326) require regular inspections of elevated exterior elements like balconies, decks, and stairways in multifamily properties and HOAs.
• SB 721 applies to apartment buildings with 3+ units, requiring inspections every 6 years after the January 1, 2026 deadline.
• SB 326 applies to HOAs and condominiums, requiring inspections every 9 years, with the first deadline having passed on January 1, 2025.
• Noncompliance can result in fines of $100–$500 per day, potential legal liability, and insurance complications.
• Repair costs from inspections may be tax-deductible or capitalized, depending on whether they qualify as repairs or improvements under IRS rules.

California now requires structural inspections of certain balconies, decks, and other elevated exterior elements in apartment buildings, condominiums, and common interest developments. These rules come following several high-profile balcony failures involving wood framing, including the 2015 collapse in Berkeley. To help clients, prospects, and others, JLK Rosenberger has provided a summary of the key details below.

Understanding the Balcony Inspection Laws

SB 721 for Multifamily Rental Properties — Senate Bill 721 applies to apartment buildings and multifamily rental properties with three or more units. It covers exterior elevated elements that are more than six feet above ground and supported in whole or in substantial part by wood structural components. This typically includes balconies, decks, exterior stairways, landings, walkways, guardrails, and similar structures.

The inspection deadline was January 1, 2026. After that, inspections are required at least every six years.

SB 326 for HOAs and Condominiums — Senate Bill 326 applies to common interest developments, including condominium associations. It covers exterior elevated elements located in common areas that are more than six feet above ground level and supported by wood or wood-based products.

For existing condominium associations, the first inspection was required to be completed by an architect or structural engineer by January 1, 2025. After that, SB 326 calls for follow-up inspections at least once every nine years. Newer projects with building permit applications submitted on or after January 1, 2020, have six years from the certificate of occupancy to complete their first inspection. Some associations may be operating under local enforcement plans or extensions.

Compliance Risks

Failure to comply with inspection, reporting, or repair requirements can result in fines ranging from $100 to $500 per day. Enforcement is handled at the local level. In some cases, a safety lien may be applied against the property for unresolved violations.

If a collapse or injury occurs involving an exterior elevated element that was not properly inspected or repaired, owners or associations may be liable. It’s possible that involved parties will request inspection reports and repair documentation.

Many insurance companies now ask for proof that SB 721 and SB 326 inspections have been completed and that any major issues have been addressed. Properties without documentation can see higher premiums, reduced coverage, or non-renewal.

Tax Considerations for Repairs

Repairs identified during balcony inspections may provide tax benefits, depending on the scope of the work. In many cases, costs to repair and maintain exterior elevated elements, such as addressing wood rot, replacing waterproofing systems, or restoring structural components, can be deducted as current expenses if they do not materially improve or extend the life of the property. More extensive projects that rise to the level of an improvement are generally capitalized and depreciated over time.

JLK Rosenberger works with property owners and associations to evaluate these costs under the IRS repair regulations, identify opportunities to maximize current deductions, and ensure proper documentation is maintained to support the treatment.

We’re Here to Help

California’s Balcony Inspection Laws are now in effect, and inspection deadlines are here for many properties. Property owners and boards with questions about how these rules affect their buildings are encouraged to work with legal, engineering, and tax advisors to understand the requirements. If you have questions about the information outlined above or need assistance with another tax or accounting issue, JLK Rosenberger can help. For additional information, call 949-860-9902, or click here to contact us. We look forward to speaking with you soon.