New compliance mandates, balcony safety deadlines, and a shifting insurance landscape are redefining what buyers need to know before closing on apartment buildings in Southern California.
By Nathan Sewell
Nathan Sewell is the founder of LA Building Inspections & Compliance, a building advisory and compliance firm serving property managers, investors, and owners throughout Los Angeles County. He is ICC-certified in both California Residential and Commercial inspection, with an architecture and building design background.
For decades, buying an apartment building in Los Angeles followed a fairly predictable due diligence process. Hire an inspector. Get a report on the roof, the plumbing, the electrical. Negotiate repairs or a price adjustment. Close. That checklist approach — similar to what sellers might order through a Pre-Listing Inspection before putting a property on the market — is no longer sufficient. A series of new state and county regulations enacted within the past two years have fundamentally changed the risk profile of multifamily real estate in Southern California. Buyers who rely solely on a traditional property inspection are now closing on buildings with compliance liabilities they do not know about, deferred obligations they have not budgeted for, and deadlines that begin counting the moment they take ownership.
The Regulatory Shift
The most significant change is LA County’s Rental Housing Habitability Program (RHHP), which launched in October 2024 and requires all rental units in unincorporated LA County to be inspected for habitability compliance every four years. The program covers an estimated 115,000 rental units. For buyers acquiring properties in unincorporated areas — including large portions of East LA, South LA, the San Gabriel Valley, and the Antelope Valley — this means inheriting either a compliant building or one that is overdue for its mandatory inspection. Properties that fail RHHP inspections and do not correct violations within the required timeframe can be placed into the county’s Rent Escrow Account Program (REAP), where tenants pay rent to a county escrow account instead of to the landlord. Fines compound and legal exposure increases. RHHP is not the only new mandate. California’s SB 721 requires balcony and exterior elevated element inspections for apartment buildings with three or more units, and SB 326 imposes a similar requirement on condominiums and homeowner associations. Buildings that have not been inspected are already past due, meaning new owners inherit that obligation immediately.
What Standard Inspections Miss
A traditional property inspection evaluates the physical condition of a building. It identifies defects, safety concerns, and deferred maintenance. For a multifamily acquisition in today’s regulatory environment, that scope leaves critical gaps. The first gap is compliance status. A standard inspection does not verify whether RHHP inspections are current, whether SB 721 balcony inspections have been completed, or whether the property’s rent stabilization status under the Los Angeles Rent Stabilization Ordinance (RSO) is properly documented. These are regulatory positions that directly affect operating costs and legal exposure. The second gap is permit history. Los Angeles has one of the highest rates of unpermitted work in the country. A converted garage that functions as a rental unit may still be illegal if no permit was ever pulled, exposing the owner to enforcement action, insurance disputes, and potential loss of rental income. The third gap is capital expenditure forecasting. Buyers need to know not just what is broken today, but what will need replacement in three, five, and ten years. Without a CapEx projection, underwriting is based on incomplete information.
The Insurance Factor
Southern California’s insurance market has tightened dramatically in recent years. Carriers are reducing coverage, increasing premiums, and in some cases refusing to renew policies for properties with deferred maintenance or unresolved code issues. Multifamily buyers must now evaluate insurability alongside condition and compliance. Sellers who commission a Pre Listing Inspection before marketing the property are often better positioned, as they can identify insurability or compliance concerns early and address them before they become leverage points during escrow.
What Investor-Grade Due Diligence Looks Like Now
For buyers acquiring multifamily properties in Los Angeles today, due diligence should simultaneously evaluate physical condition, compliance landscape, and financial forecasting. Physical condition includes structural systems, roofing, mechanical, electrical, plumbing, building envelope components, and representative interior unit inspections. Compliance landscape includes RHHP status, SB 721 or SB 326 inspection status, permit history, RSO verification, and local code compliance. Financial forecasting translates inspection findings into a realistic capital expenditure plan, allowing buyers to budget accurately and avoid capital events shortly after closing.
The Cost of Getting It Wrong
The most expensive surprises rarely come from buyers who skip inspections entirely; they come from buyers who rely on inspections that cover only physical condition but ignore compliance. A purchaser may close on a 10-unit property only to discover unresolved RHHP obligations or overdue balcony inspections that require immediate and costly repairs. The information was available before closing. Compliance records are public. Permit histories can be researched. Balcony conditions can be evaluated. The issue is whether the due diligence process was designed for today’s regulatory environment or for one that no longer exists.
What Buyers Should Be Asking
Before hiring an inspector for a multifamily acquisition in Los Angeles, buyers and their advisors should ask whether the scope includes compliance verification in addition to physical condition, whether permit records will be reviewed, whether the report includes capital expenditure projections, whether the inspector holds commercial-level credentials and code knowledge, and whether the final report can serve buyers, lenders, insurance carriers, and property managers alike.
Adapting to the New Landscape
The regulatory environment for rental housing in Los Angeles is unlikely to simplify. Oversight, mandatory inspections, and enforcement mechanisms continue to expand. Investors who understand the compliance landscape and budget accordingly can still acquire strong assets at realistic valuations. But the inspection process that was sufficient five years ago is not sufficient today. The smartest acquisitions are being made by buyers who treat due diligence not as a checkbox, but as a strategic investment in understanding the physical building, the compliance position, and the capital requirements before signing closing documents.
About the Author
Nathan Sewell is the founder of LA Building Inspections & Compliance, a building advisory and compliance firm serving property managers, investors, and owners throughout Los Angeles County and Orange County. He holds ICC certification in both California Residential and Commercial inspection, with additional credentials from ASHI, InterNACHI, and HUD/NSPIRE. His architecture and building design background informs a technical approach to multifamily due diligence, RHHP compliance, and commercial property assessment.
Website: labuildingcompliance.com
Phone: (626) 214-5929
Email: nathan@larentalinspections.com