California SB 326: How Balcony Inspections Create Special Assessment Risk and What Boards Must Do About Reserve Planning

Senate Bill 326 (Civil Code 5551) requires California condominiums with three or more multifamily dwelling units to conduct visual inspections of exterior elevated elements (EEEs) — balconies, decks, stairways, walkways, and railings — by a licensed structural engineer or architect.

The law was enacted in response to the 2015 Berkeley balcony collapse that killed six people. It represents one of the most significant structural inspection mandates in the country.

For boards, SB 326 is not just a safety compliance issue. It is a financial planning event that routinely triggers special assessments, reserve study updates, and difficult funding decisions.

What SB 326 Requires

Scope

SB 326 applies to: - Condominiums (not single-family HOAs or planned communities) with three or more multifamily dwelling units - Exterior elevated elements (EEEs): any structure extending beyond the exterior wall of the building that has a walking surface more than six feet above grade - Specifically: balconies, decks, stairways, walkways, elevated walkways, and associated railings

Inspection Requirements

Local Building Department Notification

If the inspection reveals conditions that require repair, the inspector must provide a copy of the report to the local building department. This creates a public record and may trigger code enforcement timelines.

Why SB 326 Creates Special Assessment Risk

The financial impact of SB 326 inspections is significant and often underestimated by boards.

Typical Cost Ranges

The Math Problem

Consider a 100-unit condominium with balconies. The inspection reveals that 40% of balconies require structural repairs averaging $10,000 each.

• Repair cost: 40 balconies x $10,000 = $400,000
• Reserve fund balance: $150,000 (typical for an underfunded association)
• Shortfall: $250,000

That $250,000 must come from somewhere. The options:

1. Special assessment — $2,500 per unit
2. Loan — HOA borrows $250,000, repaid over 5-10 years through increased assessments
3. Increased reserves — Raise monthly assessments to fund future repairs (does not address the immediate shortfall)
4. Combination — Partial special assessment + loan for the remainder

Most associations end up with option 4 — a special assessment for the immediate shortfall plus increased monthly assessments to prevent future underfunding.

Reserve Study Integration

SB 770 (effective January 1, 2024) requires that reserve studies incorporate SB 326 inspection findings. This means:

Before the Inspection

The reserve study should already include EEE components as reserve items: - Balcony waterproofing (useful life: 10-15 years) - Balcony structural elements (useful life: 20-30 years) - Stairway and walkway surfaces (useful life: 15-25 years) - Railing systems (useful life: 15-20 years)

If the reserve study does not include these components, it is incomplete — and the board should commission an update.

After the Inspection

Inspection findings must flow through to the reserve study:

1. Update component condition assessments — Replace estimated useful life with actual condition data from the inspection report
2. Adjust replacement cost estimates — Use the inspector's repair cost estimates rather than generic figures
3. Recalculate funding plan — With actual condition data, the annual contribution required to maintain adequate reserves will likely change
4. Disclose in annual budget report — SB 410 requires that the annual budget report include a summary of EEE inspection status and reserve implications

Funding Strategies for Boards

When SB 326 inspections reveal significant repair needs, boards have several funding strategies:

1. Special Assessment

• Pros: Addresses the shortfall immediately; no interest costs
• Cons: Can be financially devastating for individual owners; may require member vote depending on governing documents and amount relative to budget
• Best for: Associations with owners who can absorb a one-time cost

2. HOA Loan

• Pros: Spreads the cost over time; avoids large one-time burden on owners
• Cons: Interest costs increase total project expense; monthly assessments increase for loan servicing
• Best for: Associations with reliable assessment collections and the ability to service debt

3. Phased Repairs

• Pros: Spreads work and cost over multiple budget cycles
• Cons: Only viable if the inspector's timeline allows it; emergency repairs cannot be deferred
• Best for: Non-urgent repairs where the inspector provides a multi-year timeline

4. Increased Monthly Assessments

• Pros: Builds reserves over time for future EEE maintenance
• Cons: Does not address immediate shortfalls; requires patience
• Best for: Post-repair funding to ensure adequate reserves for the next inspection cycle

What Boards Should Do Now

1. If you haven't completed the SB 326 inspection: Engage a qualified structural engineer immediately. The January 2025 deadline has passed; associations that have not inspected are out of compliance.

2. If you have completed the inspection: Ensure findings are incorporated into the reserve study. Commission an update if necessary.

3. Regardless of inspection status: Review your reserve study for EEE components. If they are not included, your reserve study is incomplete.

4. Plan for the financial impact. Inspection findings that require repairs will cost money. Start evaluating funding strategies now.

For a comparison of reserve study requirements across Washington, Oregon, and California, see HOA Reserve Study Requirements — WA, OR, CA Comparison.

How CommunityPay Supports SB 326 Compliance

CommunityPay provides the financial infrastructure that connects inspection findings to reserve planning and special assessment management:

• Reserve Funding Status Reports (RSR) generated from live ledger data with 30-year cash flow projections
• Fixed asset tracking with component-level reserve analysis — identify and track EEE components separately
• Special assessment management — create, allocate, and track special assessments through owner ledgers
• Fund segregation enforced at the ledger level — reserve funds cannot be used for operating expenses
• Loan tracking — if the association finances repairs, the debt subledger tracks every payment, accrual, and allocation

Explore CommunityPay's reserve management capabilities | Request a demo

SB 326 sits within California's broader HOA compliance framework: - California HOA Disclosure Requirements 2026 — How SB 326 findings connect to SB 410 budget disclosures and Civil Code 4525 resale requirements - California AB 130 HOA Fine Limits — When special assessments create enforcement disputes, boards need compliant fine and hearing processes

This guide covers California SB 326 inspection requirements and their financial implications as of 2026. For engineering questions about specific EEE conditions, consult a licensed structural engineer. For legal advice, consult a California real estate attorney. For a walkthrough of CommunityPay's reserve planning tools, contact us.