By Jason Franklin | September 3, 2026

Buying a Condo in the San Fernando Valley: What You Must Know About HOA Risk in 2026

Most people who buy condos in the San Fernando Valley spend a lot of time thinking about the unit — the layout, the kitchen, the view from the balcony. What they don't spend enough time thinking about is the building behind the balcony. In 2026, that oversight is getting expensive.

California's HOA disclosure laws changed significantly on January 1, 2026. A new law — SB 410 — added the balcony and deck inspection report (required under SB 326) to the mandatory seller disclosure package every California condo buyer must receive. At the same time, Fannie Mae and Freddie Mac rolled out their biggest condo financing rule changes in years, with the final round taking effect August 3, 2026. Reserve minimums went up, Limited Review was eliminated, and lenders began scrutinizing HOA financials more aggressively than ever.

The result: more buyers are getting blindsided during escrow. Loans are falling through after contingency removal. Special assessment notices are arriving weeks before closing. And some buildings in the SFV are now effectively cash-only because they've failed Fannie Mae's updated standards.

Here's what you need to know before you make an offer.

What the HOA Disclosure Package Now Requires

Under California Civil Code §4525, every seller of a condo or common interest development must provide the buyer with an HOA disclosure package. It includes the CC&Rs, bylaws, operating rules, the annual budget report, a reserve study summary, any pending special assessments, and disclosure of pending litigation against the HOA.

As of January 1, 2026, that package must also include the most recent SB 326 exterior elevated element (EEE) inspection report — the structural inspection covering balconies, decks, stairways, and other load-bearing elements. If the inspection doesn't exist (the first deadline was January 1, 2025), the absence itself is a required disclosure item.

Why does this matter? Because those inspection reports have teeth.

SB 326 inspections are revealing structural problems in complexes across California that have never been reported or repaired. When an engineer identifies failing waterproofing or compromised load-bearing components, the HOA is legally obligated to address them — and that cost flows down to homeowners as special assessments. Independent researchers have documented special assessment charges of $40,000–$175,000 per unit in complexes where SB 326 inspections found serious deficiencies.

Your job during the contingency period is to read that report carefully. If the report shows material deficiencies or deferred repairs — or if the report doesn't exist at all — ask your agent to request an explanation before you remove your inspection contingency.

Three Financial Red Flags to Check in Every HOA Package

Even without structural problems, an HOA's financial picture can be a deal-killer. Here's what to look for in the reserve study and budget disclosures.

Reserve funding below 70%

The reserve fund pays for major capital repairs — roofs, elevators, asphalt, pools, plumbing. California law doesn't mandate a specific funding level, but industry consensus is clear: 70% or above is strong; below 30% is at high risk of a special assessment. About 74% of HOAs nationally are underfunded, which means the odds are not in your favor by default.

Request the Annual Budget Report and Reserve Study Summary. Find the "percent funded" figure. If it's below 50%, ask why, and ask whether any large repairs are being planned or discussed.

Pending assessments — approved or in discussion

Special assessments above 5% of the annual budget require a member vote under California Civil Code §5605. Boards are legally required to disclose approved assessments in the §4525 package. But "pending" doesn't always mean "publicly announced." Review the last 12 months of HOA board meeting minutes — the package should include them. Arguments about contractor quotes, deferred maintenance, or structural repairs showing up in those minutes are a signal that an assessment may be coming.

Unresolved litigation

An HOA fighting a construction defect lawsuit, a contractor dispute, or a homeowner claim is a complication that can affect both your financing and your ownership experience. Fannie Mae and Freddie Mac will flag buildings with unresolved litigation during the underwriting condo review. This doesn't always kill the deal, but it can delay it or add conditions — and discovering it after contingency removal puts you in a difficult position.

Non-Warrantable Condos — and Why They Block Standard Financing

A term that surprises a lot of SFV condo buyers: non-warrantable.

A condominium is "warrantable" when it meets Fannie Mae and Freddie Mac's standards for conventional financing. When it doesn't, it's non-warrantable — and any buyer trying to get a conventional loan (including jumbo conforming, FHA, or VA) in that building will be denied.

Fannie Mae's updated rules, finalized August 3, 2026, raised the reserve minimum from 10% to 15% of annual budgeted dues. They eliminated Limited Review — a faster, lighter condo approval track. They added insurance coverage minimums that HOAs must meet, or the building fails the insurance test at underwriting. That last point is particularly dangerous: a loan can be denied after you've already removed your financing contingency, ordered inspections, and locked a rate.

If a complex fails the warrantability review, your options are limited:

• Pay cash — no financing required, so no lender review
• Use a portfolio loan — a lender who holds the mortgage rather than selling it to Fannie/Freddie; these carry higher rates and tighter qualification requirements

The right time to discover non-warrantable status is before you go into escrow — not after you've removed contingencies and your escrow officer calls to say the underwriter declined the condo project approval.

The Met at Warner Center in Woodland Hills is an example of an SFV complex that has maintained VA approval — which requires ongoing financial and structural compliance. Not every complex in the Valley holds that status. Before you fall in love with a unit, have your lender run a condo review on the building. It takes 7–10 business days and costs nothing.

How to Protect Yourself During the Contingency Period

The standard California contingency timeline gives you 17 days for your inspection contingency and 21 days for your loan contingency. Within those windows, four things need to happen.

Order the lender's condo review immediately. Don't wait until the inspection contingency deadline has passed. As soon as you're in escrow, send the HOA documents to your lender and ask them to begin the condo project approval process. Non-warrantable findings typically come back within 7–10 business days — but if you're slow to request it, you may be at your contingency deadline before you have an answer.

Read the SB 326 inspection report. Don't skim it. If there are marked deficiencies, contact the inspector's firm or your agent to understand the repair timeline and cost implications. Your purchase price negotiation may need to reflect a pending assessment — and you may have grounds to renegotiate or cancel if deficiencies are material.

Calculate your total monthly cost. HOA dues are only part of the picture. Add any special assessments currently being collected, estimated Mello-Roos (if applicable), and property taxes at the new assessed value. The full monthly picture often looks different from what the listing advertises.

Request 15 months of board meeting minutes. The §4525 package typically includes 12 months. Ask for 15. Board discussions about deferred repairs, vendor disputes, or budget shortfalls in the months just before the disclosure package was assembled won't show up in a standard 12-month request — but they'll show up in yours.

None of these steps are complicated. They just require knowing to ask before you sign the contingency removal form.

Frequently Asked Questions

What is a non-warrantable condo and can I get a regular mortgage on one?

A non-warrantable condo is a unit in a building that doesn't meet Fannie Mae or Freddie Mac's financing guidelines — typically because of insufficient reserves, unresolved litigation, investor concentration above 35%, or structural compliance failures. You cannot get a conventional, FHA, or VA loan on a non-warrantable condo. You'd need to pay cash or use a portfolio loan, which carries a higher interest rate and stricter qualification requirements.

What is the SB 326 balcony inspection and does every condo need one?

SB 326 requires all California condominium HOAs to hire a licensed structural engineer or architect to inspect exterior elevated elements — balconies, decks, stairways, and similar structures. The first inspection deadline was January 1, 2025. Since January 1, 2026 (under SB 410), the most recent SB 326 inspection report must be included in the seller's mandatory HOA disclosure package. If the inspection hasn't been done, the absence itself must be disclosed.

What happens if the condo I want to buy has a pending special assessment?

If the HOA has an approved special assessment, it must be disclosed in the Civil Code §4525 package. Depending on the purchase contract, pending assessments may be paid by the seller at closing, split between buyer and seller, or transferred in full to the buyer — this is negotiable. Make sure your agent addresses it explicitly in the offer or purchase agreement. Undisclosed assessments that surface after closing can expose the seller to legal liability.

How do I find out if a condo in the San Fernando Valley is VA-approved?

You can search the Department of Veterans Affairs condo approval database at benefits.va.gov. Your real estate agent or VA lender can also check this before you go into escrow. VA approval requires ongoing HOA compliance, so a complex that was approved two years ago may not be approved today if its financial condition has deteriorated.

What is a reserve study and how much HOA funding is considered healthy?

A reserve study is an engineering analysis of a building's major components — their remaining useful life, estimated replacement cost, and recommended funding levels. California requires HOAs to update their reserve studies regularly. A funding level of 70% or above is considered strong; below 30% is considered at high risk of a special assessment. Ask your agent to request the most recent reserve study summary as part of your due diligence during the contingency period.

Buying a condo in Woodland Hills, Tarzana, or anywhere else in the San Fernando Valley can be a smart move — but only if you understand what you're actually buying into. The unit is just part of the purchase. The HOA's financial health, SB 326 inspection status, and Fannie Mae warrantability are equally real parts of your investment.

If you're shopping condos in the SFV and want to vet a specific complex before you make an offer, I'm happy to walk you through the questions to ask and the documents to review. Reach out anytime at jasonfranklinre.com.