Artificial Intelligence, Disclosures, and Inspections: California Real Estate Law Changes for 2026

It is time to take a look at new laws coming onto the books for 2026 that will be impacting the real estate industry. This article will discuss several of the important laws that real estate professionals should keep in mind as the New Year takes off.  The new laws touch on everything from artificial intelligence, federal anti-money laundering regulations, to laws regarding regulating the minimum and maximum temperatures of residential rental units and everything in between. Before moving into a discussion of the laws, the authors want to wish you a Merry Christmas and Happy New Year! Thank you for reading along with us this year, we wish you a happy and prosperous 2026!  

Antitrust and Pricing Algorithms: AB 325

Assembly Bill (“AB”) 325 - Codified in Business and Professions Code, Sections 16729 & 16756.1 - Effective January 1, 2026

AB 325 is making substantial changes to California’s anti-trust laws, known as the “Cartwright Act.” With AB 325 signed by the governor in October, “common pricing algorithms” will be prohibited from being used in a contract, combination in the form of a trust, or conspiracy to restrain trade. (Bus. & Prof. Code, § 16729.) A “common pricing algorithm” is defined under the law as “any methodology, including a computer, software, or other technology, used by two or more persons, that uses competitor data to recommend, align, stabilize, set, or otherwise influence a price or commercial term.” The law will also prohibit a user or distributor of a pricing algorithm or software from “coerc[ing]” others to adopt prices or terms recommended by the algorithm, although the law does not define coercion. In the real estate industry, pricing tools and models used by various listing sites are potentially impacted by the law if those tools are shared by separate firms.

Importantly, when it comes to anti-trust litigation generally, AB 325 also establishes new (and easier) pleading standards for anti-trust claims brought under the Cartwright Act. Previously, plaintiffs needed to allege facts in their complaint that showed a “meeting of the minds” between anti-trust defendants that ruled out independent conduct between the defendants when it came to their conduct that was under scrutiny. This previous standard was the same as the higher federal pleading standard that is still in place for cases that are brought in federal court under federal anti-trust law. With the new language being codified in Business and Professions Code, Section 16756.1, plaintiffs will only need to allege facts showing a contract, combination, or conspiracy in the restraint of trade is “plausible” under the circumstances. This will be a much easier burden for Plaintiffs to meet when bringing claims under the Cartwright Act in California courts.  

Digitally Altered Images and Advertising Disclosures: AB 723

AB 723 - Codified in Business and Professions Code, Section 10140.8 - Effective January 1, 2026

AB 723 may impact day-to-day real estate as much as any new law in 2026 because it deals with any advertising and marketing materials where images are digitally altered. Specifically, effective January 1, 2026, if advertising or promotional materials in real estate transactions include digitally altered images, they must also contain a disclosure statement noting that the image has been digitally altered. Further, the disclosure must also include a link, URL, or QR code that includes the original unaltered image and clearly identifies it as the unaltered image. Under AB 723, the statement must be “reasonably conspicuous” and on or adjacent to the digitally altered image including language that the original can be accessed through the included link, URL, or QR code, although what constitutes “reasonably conspicuous” is not defined in the law.

Additionally, if the image is on a website over which a real estate broker or salesperson has control, there are two ways to comply with the law. First, the broker or salesperson who controls the website can comply by including the original unaltered image along with the altered image. Or alternatively, the broker or salesperson who controls the website can provide a link, URL, or QR code as discussed above along with a reasonably conspicuous statement that the image has been altered.

Importantly, the definition of digitally altered does not include images where “only lighting, sharpening, white balance, color correction, angle, straightening, cropping, exposure, or other common photo editing adjustments are made,” and those changes do not otherwise “change the representation of the real property.” (Bus. & Prof. Code, § 10140.8(b)(2).) Digital alterations do include “image[s] created by or at the direction of the real estate broker or salesperson, or person acting on their behalf, that has been altered through the use of photo editing software or artificial intelligence to add, remove, or change elements in the image, including, but not limited to, fixtures, furniture, appliances, flooring, walls, paint color, hardscape, landscape, facade, floor plans, and elements outside of, or visible from, the property, including, but not limited to, streetlights, utility poles, views through windows, and neighboring properties.” (Bus. & Prof. Code, § 10140.8(b)(1).)

Licensees can expect Department of Real Estate (DRE) Regulations on this issue in 2026. Brokers are reminded that supervising advertising is a duty under the DRE Regulations.

Balcony Inspections and Asbestos Delays: AB 130

AB 130 – Codified in Health and Safety Code, Section 17973(d)(2) – Modification Effective as of June 30, 2025 (codified as urgency legislation)

As some readers may know, Health and Safety Code, Section 17937, requires buildings with three or more multifamily dwelling units to have inspections of decks and balconies performed to ensure that they are in a “generally safe condition, adequate working order, and free from any hazardous condition[s]….” (Health & Saf. Code, § 17973(a).) This law has been the center of much discussion over the last two years. Originally, all buildings falling under the law had to be inspected on or before January 1, 2025, but this compliance deadline was extended to January 1, 2026, to allow the relevant parties across the industry to comply. There was widespread concern in the real estate industry that very few parties would be able to comply with the original deadline for completing inspections. Critically, January 1, 2026, is still the deadline for complying with the law’s requirement to have an inspection performed.

AB 130, however, modifies the current timeline for completing balcony inspections and repairs if asbestos is discovered in the process of the inspection and the inspection cannot be completed because of it. In this situation, the owner (or other responsible party) will have nine (9) months to abate the asbestos and then an additional three (3) months to complete the initial inspection after abatement has been completed. Owners must keep records concerning the presence of the asbestos and the subsequent remediation for three years after the inspection is completed. (Health & Saf. Code, § 17973(d).)

New HOA Disclosure Requirements for Balcony Inspections: SB 410

Senate Bill (“SB”) 410 – Codified in Civil Code, Sections 4525, 4528, 5200, and 5551 – Effective January 1, 2026

Touching again on balcony inspections, SB 410 modifies existing law regarding required HOA disclosures to include a report regarding the balcony inspection performed. Under SB 410, HOAs will now be required to include the most recent balcony inspection report in the package of HOA disclosures provided to sellers and prospective purchasers of real property under the HOAs management. (Civil Code, § 4525(a)(11).) Additionally, HOAs must keep a copy of the balcony inspection report for existing members to inspect. (Civil Code, § 5200(a)(15).) Further, the balcony inspection report must include a first page summary including all of the following: the date of inspection; the total number of units in the condominium project; the total number of units in the condominium project with exterior elevated elements; the total number of exterior elevated elements in the condominium project; the total number of exterior elevated elements inspected; the total number of inspected exterior elevated elements identified as posing an immediate threat to the safety of the occupants, as of the date of the inspection, and the number of units impacted; and a certification that the inspector has conducted a visual inspection and evaluated a statistically significant sample (not defined in the statute) of the exterior elevated elements within the condominium project. (Civil Code, § 5551(e)(5)(A)-(G).)

The aim of the new disclosure requirements is to provide full information to prospective buyers, as well as to facilitate sales transactions involving lenders who require proof of compliance with state inspection requirements as a condition of lending.

New Smoking and Vaping Disclosure Obligations: AB 455

AB 455 – Codified in Business and Professions Code, Section 10084.2, Civil Code, section 1102.6(k), and Health and Safety Code, section 25417.2

Starting on January 1, 2026, sellers of single-family residential real property will have a duty to disclose actual knowledge of “any residue from smoking tobacco or nicotine products, or any history of occupants smoking tobacco or nicotine products on the property… in writing…” to purchasers. (Civil Code, §1102.6k.) Tobacco or nicotine products include vaping devices. This new law will apply to any transaction in which a transfer disclosure statement is required, i.e., most residential 1–4-unit sales. Additionally, AB 455 will require the statutory “Homeowner’s Guide to Environmental Hazards” to include “thirdhand smoke” as a topic in light of the change to the new disclosure requirements.  

Licensees can anticipate this disclosure will be in the “Smoking” section of the Seller Property Questionnaire (SPQ).

Federal FinCEN Real Estate Reporting Requirements

U.S. Department of Treasury’s (“Treasury’s”) Financial Crimes Enforcement Network (“FINCen”) Reporting Requirements – Codified in 31 Code of Federal Regulations Part 1031.320 – Effective March 1, 2026

Starting March 1, 2026, FinCen will require certain parties involved in real estate transactions to collect and report data about the buyers and sellers of real property to U.S. Treasury. The aim of the reporting requirements is to sniff out potential money laundering transactions. Under the new regulations, the reporting requirement applies to real property transactions of one to four residential units, vacant land where the buyer intends to construct one to four residential units, or cooperative housing, where the buyer is an entity or trust; and where the buyer is making an “all-cash” purchase or financing the transaction through a bank or institution that does not have an existing money laundering reporting obligation. (31 C.F.R. § 1031.320(b).) If the transaction meets these criteria, then the appropriate entity must report the legal name, date of birth, address, DBAs, citizenship, and taxpayer identification number of the buyers and sellers and/or their respective entities in the transaction. (31 C.F.R. § 1031.320(d)-(i).) If the information is not reported to FinCen, the escrow will not close. In terms of collecting and reporting the information, title or escrow will likely be the reporting parties (although that will not necessarily be the case for every transaction). (See 31 C.F.R. § 1031.320(c) [denoting the “cascade” of parties potentially responsible for reporting].)

Electronic Return of Security Deposits: AB 414

AB 414 – Codified in Civil Code, § 1950.5 – Effective January 1, 2026

In the landlord-tenant space, electronic return of security deposits is now the default method for returning security deposits to tenants who made security or rental deposits electronically, unless otherwise specified in writing by the parties. (Civil Code, §1950.5(h)(1)(A).) While electronic return of a security deposit is standard, the itemization of deductions from the security deposit still defaults to mail unless otherwise agreed to between the parties. (Civil Code, §1950.5(h)(1)(B).)

Importantly for landlords, where the tenant paid the security and/or rent electronically, AB 414 also requires that notice be given to the tenant that they have a right to receive the security deposit electronically upon notice from either party of their intent to terminate the tenancy. (Civil Code, §1950.5(h)(1)(A)(ii)(II).) Where the tenants are made up of multiple adults, the security must be returned via check made payable to all the tenants and delivered to one of them. (Civil Code, §1950.5(h)(1)(C).) However, this default can be altered through an agreement with all parties concerning who the security deposit will be delivered to and/or how the security deposit is to be divvied up. (Ibid.)

Post-Disaster Smoke and Debris Remediation: SB 610

SB 610 – Codified in Civil Code, Sections 798.64, 1941.8–1941.9, Financial Code, Section 338, and Government Code, Section 65863.7 – Effective January 1, 2026

Coming on the heels of some of the worst fires in Southern California history, SB 610 makes it the duty of a landlord to remove and/or remediate debris, smoke residue, and ash that are a result of a natural disaster. (Civil Code, § 1941.8(a).) The statute requires such remediation to occur within a reasonable time after the damage and places notice and documenting requirements on the landlord concerning the remediation. (Civil Code, § 1941.8(c).) The property is presumed to be untenable until an appropriate public health official determines the debris does not contain toxic waste. (Civil Code, § 1941.8(b).) SB 610 allows local governing bodies to place stricter requirements and duties on landlords related to disaster debris remediation and removal.

New State Policy on Maximum Indoor Temperatures: SB 655

SB 655 – Codified in Health & Safety Code, Section 17914 – Effective January 1, 2026

As of January 1, 2026, SB 655 declares it the policy of the State of California that all dwelling units shall be able to attain and maintain a “safe” maximum indoor temperature. (Health & Saf. Code, § 17914.) Practically, the new policy requires agencies to include this new policy goal in adopting, revising, or establishing regulations starting January 1, 2027. There is no guidance provided as to what a “safe” indoor temperature is.