California Real Estate Law Highlights Every Property Owner and Real Estate Professionals Should Know

California continues to enact new laws affecting real property each year. The Legislature and regulatory agencies regularly adopt statutes and rules that impact property ownership, sales transactions, leasing practices, and real estate marketing. While many of these changes are incremental, the cumulative effect is a regulatory environment that becomes increasingly complex for property owners, landlords, real estate professionals, and investors.

Staying current with these legal developments is essential. Failure to comply with disclosure obligations, habitability requirements, or advertising regulations can lead to civil liability, regulatory enforcement actions, and costly disputes. As a result, property owners and industry professionals should ensure they are using updated transactional documents and remain informed about changes affecting real estate practice.

In prior years, this author summarized key legislative developments while directing readers to comprehensive annual legislative summaries published by industry organizations such as the California Association of Realtors (CAR). However, many of CAR’s detailed legislative summaries and legal updates are now distributed primarily through member-only platforms. As a result, independent review of statutory developments has become increasingly important for non-members seeking to stay informed about changes affecting California real estate.

As educating oneself becomes more difficult, buyers, sellers, landlords, tenants, homeowners’ associations, and anyone involved in real estate transactions should take pragmatic steps to ensure compliance. These steps include using standardized form documents produced by established organizations such as CAR, confirming that the most current version of those forms is being used, and consulting with legal counsel or qualified professionals when questions arise.

Several legislative developments taking effect in 2026 illustrate the Legislature’s continued focus on consumer protection, transparency in marketing practices, and habitability standards for rental housing.

Below are several noteworthy developments that property owners and real estate professionals should understand.

Seller Disclosures: “Thirdhand Smoke”

California has also begun addressing what researchers refer to as “thirdhand smoke,” which is the residue left behind after tobacco smoke settles on surfaces such as walls, carpets, furniture, and building materials. Unlike secondhand smoke, which is inhaled directly from the air, thirdhand smoke refers to contamination that may remain in a property long after smoking has occurred.

Assembly Bill 455, effective January 1, 2026, addresses this issue in two ways. First, the legislation requires sellers of single-family residential property who have actual knowledge of tobacco or nicotine smoking or vaping residue, or a history of occupants smoking or vaping on the property, to disclose that knowledge to buyers in writing.

The disclosure requirement applies when the seller has actual knowledge of:

• Residue from smoking or vaping tobacco or nicotine products within the property; or
• A history of occupants smoking or vaping tobacco or nicotine products on the property.

Importantly, the statute does not require sellers to conduct testing or investigation to determine whether thirdhand smoke exists. The obligation arises only when the seller has actual knowledge of the condition.

Second, the law requires the Homeowners’ Guide to Environmental Hazards to be updated to include information explaining the risks associated with thirdhand smoke. That guide is commonly delivered to buyers as part of the environmental hazard disclosure process in California real estate transactions.

Although the statute is narrowly tied to actual knowledge, the change reflects California’s continued expansion of disclosure obligations relating to environmental conditions that may affect residential property.

Rental Property Appliance Requirements

Another notable legislative development concerns the habitability requirements for residential rental properties.

Assembly Bill 628 modifies California’s landlord-tenant laws by requiring landlords to provide certain basic appliances as part of a habitable rental unit.

Beginning in 2026, landlords must provide a working stove and refrigerator in residential rental units unless the tenant specifically agrees to supply their own refrigerator.

Historically, many rental units in California did not include refrigerators, particularly in older multifamily buildings. The new statute seeks to standardize rental housing expectations by treating refrigeration as a basic amenity similar to cooking facilities.

Under the statute:

• Landlords must provide a refrigerator in good working order in residential rental units.

• A tenant may agree to provide their own refrigerator only if the lease includes an express written waiver acknowledging the tenant’s request to supply their own appliance.

• The waiver must include the following statutory notice:

“Under state law, the landlord is required to provide a refrigerator in good working order in your unit. By checking this box, you acknowledge that you have asked to bring your own refrigerator and that you are responsible for keeping that refrigerator in working order.”

• Tenants retain the right to withdraw the waiver with 30 days’ written notice, at which point the landlord must provide a working refrigerator.

This change has practical implications for property owners and property managers. Lease forms should be updated to reflect the new waiver language where tenants provide their own appliances. Landlords should also ensure that appliances provided with rental units are maintained in working condition, as appliance failures could potentially implicate habitability claims.

Artificial Intelligence and Real Estate Advertising

The rapid expansion of artificial intelligence tools has also prompted legislative attention in the real estate context. In recent years, AI-driven software has made it easier to digitally stage homes, alter listing photographs, and even generate entirely synthetic property images.

While these technologies can enhance marketing efforts, they also raise concerns about misleading representations of property conditions.

Assembly Bill 723 addresses these concerns by imposing new disclosure requirements for digitally altered property images used in real estate advertising.

Beginning January 1, 2026, advertisements produced by real estate licensees must include a reasonably conspicuous disclosure if images have been materially altered through digital editing or artificial intelligence.

In addition, advertisements must provide access to the original, unaltered image when a listing photo has been materially modified.

Examples of alterations that may trigger the disclosure requirement include:

• Removing nearby structures or power lines
• Altering views or landscapes
• Adding features that do not exist on the property
• Artificially staging rooms with furniture or design elements
• Generating images using AI rendering tools

However, the statute specifically excludes common photo editing adjustments that do not change the substantive representation of the property. The law states that modifications limited to lighting, sharpening, white balance, color correction, cropping, exposure, straightening, or similar adjustments do not require disclosure.

This distinction reflects an attempt by lawmakers to balance consumer protection with common marketing practices. Real estate photography has long involved modest editing to improve lighting or color balance, and the Legislature appears to recognize that such adjustments do not necessarily mislead buyers.

Nevertheless, real estate brokers and marketing vendors should review their listing workflows carefully. AI staging services, image generation tools, and digital rendering platforms are increasingly common, and improper use of those technologies could now result in regulatory violations or consumer claims.

Federal Reporting Requirements for Certain All-Cash Real Estate Transactions

In addition to state-level legislation, federal regulatory developments will also affect real estate transactions beginning in 2026.

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has adopted new reporting requirements for certain non-financed residential real estate transactions, particularly those involving purchases through legal entities such as limited liability companies or trusts.

The rule is designed to increase transparency and combat money laundering in the real estate market.

Beginning March 1, 2026, certain all-cash residential transactions will require reporting of beneficial ownership information and other transaction details to FinCEN.

While the reporting obligation will primarily fall on settlement agents or closing professionals, the rule may affect how transactions are structured and documented.

Real estate professionals should expect:

• Increased documentation requests for buyers purchasing through entities
• Additional compliance procedures for closing agents
• Greater scrutiny of high-value all-cash transactions

Although these federal reporting requirements do not directly alter California property law, they introduce another layer of regulatory compliance that industry participants must understand.

Conclusion

The continued expansion of real estate regulation in California reflects broader policy priorities related to consumer protection, housing standards, and transparency in real estate transactions.

For property owners, landlords, and real estate professionals, these developments reinforce the importance of staying informed and maintaining updated practices. Disclosure obligations continue to evolve, habitability standards are expanding, and technological innovations are increasingly subject to regulation.

As these laws take effect, industry participants should review their transactional documents, marketing procedures, and leasing practices to ensure compliance. In many cases, working with experienced real estate professionals and legal counsel can help reduce the risk of disputes and ensure that transactions proceed smoothly in an increasingly complex regulatory environment.