California Reserve Study Laws: SB 326, SB 721, SB 900 and the 2026 Changes

California has the most detailed reserve study rules in the country, and they have moved quickly since 2025. Utility lines now belong in the component list, the balcony inspection deadline for condominiums has come and gone, and a bill that would make reserve funding mandatory is currently up for considration.

Below: what the Davis-Stirling Act requires today, what SB 326, SB 721 and SB 900 added, and what AB 2050 would change. For how we prepare studies in the state, see our California reserve study page.

Davis-Stirling: The Core Reserve Study Requirements

The Davis-Stirling Common Interest Development Act applies to condominiums, planned developments, stock cooperatives and community apartment projects.

Its reserve provisions sit in Civil Code Section 5550 and the sections around it.

• Three-year inspection cycle. At least once every three years, the board must arrange a competent and diligent visual inspection of the accessible areas of the major components it must repair, replace, restore or maintain, as part of a reserve study. The rule applies whenever those components' replacement value is at least half the gross budget, excluding reserves.
• Annual review. The board must review the study every year and adjust its reserve analysis as needed.
• Minimum contents. The study must identify major components with a remaining useful life of 30 years or less, estimate their remaining life, estimate the cost to repair or replace them, estimate the annual contribution needed, and set out a reserve funding plan.
• Funding plan adopted in the open. Under Section 5560, the funding plan must show the date and amount of any assessment change needed and must be adopted at an open board meeting.
• Reserve accounts protected. Section 5500 requires a quarterly review of reserve accounts; Section 5510 limits reserve spending to major component work and requires two signatures on withdrawals; Section 5515 permits temporary transfers to operating only with notice and a written repayment plan.

Note that the Act requires the study, the plan and the disclosures, but not funding to any particular level.

What Must Be Disclosed to Owners Each Year

Section 5300 requires an annual budget report 30 to 90 days before the end of the fiscal year. It must include a reserve summary prepared under Section 5565, printed in boldface, showing each major component's replacement cost and remaining life, the cash reserves needed, the cash actually set aside, and the percentage the second figure represents of the first.

That percentage is the association's percent funded.

It must also state whether the board plans to defer major repairs or anticipates a special assessment, and be accompanied by the Section 5570 Assessment and Reserve Funding Disclosure Summary.

SB 326: Balcony Inspections for Condominiums

SB 326 added Civil Code Section 5551 from January 1, 2020. It applies to condominium projects with buildings of three or more units, not to planned developments.

• What is inspected. Exterior elevated elements: wood-supported balconies, decks, walkways, stairways and railings more than six feet above ground, plus their waterproofing.
• Who inspects. A licensed structural engineer or architect. AB 2114, effective January 1, 2025, added licensed civil engineers.
• How much. A statistically significant random sample, sized to give a 95% confidence level with a 5% margin of error.
• When. The first inspection was due by January 1, 2025, and that deadline was not extended. Inspections then repeat at least every nine years, so associations that met the deadline are next due by January 1, 2034. Buildings with a certificate of occupancy issued after January 1, 2020 have six years from that date.
• Link to reserves. The report must be incorporated into the association's reserve study. If the inspector finds an immediate safety threat, the association must be told at once.

Associations that missed the deadline remain non-compliant until the inspection is done.

SB 721: The Parallel Rule for Apartment Buildings

SB 721 covers rental apartment buildings with three or more units, under Health and Safety Code Section 17973. At least 15% of each type of exterior elevated element must be inspected.

AB 2579 extended the first deadline to January 1, 2026, and inspections then recur every six years. There is no reserve study integration requirement. It applies to the commercial property owners we serve.

SB 900: Utility Lines Now Count as Major Components

SB 900 took effect on January 1, 2025 and changed two things.

Under Section 4775, an association must repair an interruption to gas, heat, water or electrical service that originates in the common area, even where the work extends into a unit, and must begin within 14 days. Under Section 5550(c), gas, water and electrical service lines the association is responsible for are now major components and must appear in the reserve study.

Older studies often left utility lines out. Any study prepared or updated since January 2025 should list them with a cost and remaining life.

AB 2050: The 2026 Bill That Would Make Funding Mandatory

AB 2050, the "HOA Rainy Day Fund" bill, passed the Legislature in August 2026 and, at the time of writing, awaits the Governor's decision. If signed, its requirements become operative on January 1, 2032:

• Each reserve study must state the minimum reserve contribution level that keeps the projected balance above zero over the following 30 years.
• The association must fund reserves at least at that level every year.
• If the balance is projected to fall below zero at any point in 30 years, the association must transfer at least 15% of its gross annual budget to reserves each year until the projection is positive.
• If regular assessments cannot cover the minimum level, the board must levy a reserve funding special assessment, limited to once every nine years, with a member vote where the amount exceeds the existing cap.

It lines up with lender pressure: Fannie Mae and Freddie Mac condominium standards already require at least 10% of the budget to go to reserves, and Fannie Mae has proposed 15%.

What California Boards Should Do Now

• Confirm your last site-visit study is under three years old and that the board has reviewed it this year.
• Confirm the SB 326 inspection is complete and its findings are in the reserve study.
• Check that gas, water and electrical lines appear as line items.
• Ask whether your 30-year projection ever drops below zero; that is the figure AB 2050 would turn into a legal duty.
• Review the annual budget report against Sections 5300, 5565 and 5570 before it goes out.

Frequently Asked Questions

• Does California require HOAs to fund their reserves? Not yet. Current law requires the study, the funding plan and annual disclosure. AB 2050 would require funding from 2032 if it becomes law.
• How often is a California reserve study required? A visual inspection at least every three years, with an annual review in between. See our guide to how often to update a reserve study.
• Does SB 326 apply to townhomes? Only if the project is legally a condominium with buildings of three or more units. Planned developments are outside SB 326.

How Reserve Study Group Can Help

Our California studies itemise utility lines and SB 326 elements and include the 30-year projection boards will need under AB 2050. If your condominium or HOA is due for a study, request a proposal and our California team will be in touch.

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