Decision guide
New Construction vs. Resale Condos in Los Angeles: Disclosures, Defects and Risk
By Nick McCandless · Updated · Editorial policy
The short answer
A new LA condo bought from the developer comes with a state-issued public report and California's construction-defect standards, which allow claims against the builder for up to 10 years after substantial completion[1][2][3]. But the association has no operating history, and its budget and reserves are projections. A resale condo lets you read years of budget reports, reserve studies, minutes and the balcony inspection report the seller must hand over[4], but you take on an older building with whatever deferred work it has. Choose the risk you can verify.
New construction vs. Resale at a glance
| Factor | New construction | Resale |
|---|---|---|
| Main disclosure document | The Real Estate Commissioner's public report, required before a subdivider sells or offers units[1]. | The seller's Civil Code 4525 package: governing documents, budget report, assessment statement, rental limits, minutes on request and the balcony report[4]. |
| Your money before closing | Where a blanket encumbrance lacks a release clause, purchaser money must be held in an escrow acceptable to the Commissioner or otherwise protected[5]. Read the escrow terms. | Held in escrow under the purchase contract until closing. |
| Defect claims | Builder liability standards for new residential construction, such as windows, roofs and balconies not letting water through[2]; claims generally within 10 years of substantial completion[3]. | The same 10-year window runs from original completion, so in an older building it may have closed[3]. Any initial list of defects must be disclosed[4]. |
| Financial track record | A projected budget and initial reserve plan with no history. | Budget reports, reserve studies every three years and minutes[6][7]. |
| Balcony and walkway inspections | Buildings permitted on or after January 1, 2020 must be inspected within six years of the certificate of occupancy[8]. | At least every nine years; the most recent report is part of the resale package[8][4]. |
| Lender review | New-project review; Fannie Mae excludes new projects offering sale or financing structures beyond its policies[9]. | Established-project review; unremediated critical repairs make a project ineligible[9]. |
| What you can see | Plans, a model unit or a newly finished building. | The actual unit, its views and how the building is run. |
The public report and your deposit
California's Subdivided Lands Law prohibits selling or offering units in a covered subdivision without first obtaining a public report from the Real Estate Commissioner[1]. Ask for the report before you sign, and read it alongside the purchase agreement and the governing documents. It is the state's disclosure about the project, not an endorsement of it.
How your deposit is protected depends on the project's financing. If the subdivision is subject to a blanket encumbrance — typically the construction loan — without a clause releasing your unit, the law requires purchaser money to go into an escrow acceptable to the Commissioner, or to be protected by a trust, bond or other approved arrangement, until a release is obtained[5]. Ask the escrow holder and your attorney which arrangement applies, when funds can be released and what happens if the project does not close.
Defects and warranties
California's construction-defect statute, Civil Code sections 895 to 945.5, sets functional standards for new residential construction sold as an individual dwelling. For example, windows, roofs and balconies must not let water pass into the structure, and builders can be liable when those standards are violated[2]. Claims under that title generally must be brought within 10 years of substantial completion[3]. Builders may also offer express warranties; read what they cover and for how long.
For a resale buyer, the clock started when the building was completed. If the association has served an initial list of defects on the builder in a claim process that has not been resolved, the seller must give you a copy[4]. Ask whether any claim was settled and how the money was used.
Budgets you can test, and budgets you can't
A resale building's financial life is on paper. Its reserve study must include a visual inspection at least every three years and a funding plan[6]. The annual budget report must say whether repairs are being deferred, whether special assessments are anticipated and whether the association owes on loans[7]. Twelve months of approved minutes are available to you on request[4]. Read them together: a well-funded reserve plan and minutes showing no unplanned work are good signs. A deferral statement and repeated discussion of a repair are reasons to dig.
A new building has none of this history. Its first budget is an estimate, and assessments often change once the association pays real bills. Compare the projected budget with established buildings nearby using our building comparison tool, and read our resale package guide for what to expect from a resale seller.
When new construction is the better choice
- You want new systems and finishes and will read the public report and governing documents with an attorney before committing.
- You understand how your deposit is held and are comfortable with the developer's track record.
- You can live with a budget that is a projection, and with assessments that may change in the first years.
- You value the defect standards and the 10-year claim window that come with new construction.
When resale is the better choice
- You want to read actual budget reports, reserve studies and minutes before committing.
- You need to move in or close on a known date.
- You need conventional or FHA financing and want a project whose eligibility can be confirmed now.
- You are prepared to evaluate an older building's balcony inspection, deferred repairs and assessment history.
Documents to request either way
Track what you have and what is still missing in the condo document checklist. For a resale, size any anticipated special assessment with the special assessment calculator. Our Davis-Stirling primer explains the association rules that apply once you own.
- New construction: public report, purchase agreement, escrow instructions, governing documents, projected budget, any express warranty.
- Resale: governing documents, annual budget report and reserve summary, assessment statement, minutes, balcony inspection report, any initial list of defects.
- Both: the association's insurance summary and the lender's project-eligibility answer.
Common questions
What is a DRE public report for a new LA condo?
It is the disclosure the California Real Estate Commissioner issues for a subdivision. State law prohibits selling or offering units in a covered subdivision without first obtaining it, so ask for it before you sign a purchase agreement.
How long can I bring a construction defect claim on a new California condo?
Claims under California's construction-defect title generally must be brought within 10 years of substantial completion of the improvement, so the window runs from the building's completion, not from your purchase.
Is my deposit on a new LA condo held in escrow?
It depends on the project's financing. If the subdivision has a blanket encumbrance without a release clause for your unit, state law requires purchaser money to be held in an escrow acceptable to the Real Estate Commissioner or protected by another approved method until a release is obtained. Confirm the arrangement with the escrow holder.
What documents does a resale LA condo seller have to give me?
Civil Code section 4525 requires the governing documents, the most recent budget report and reserve disclosures, a statement of current and unpaid assessments, approved but not-yet-due assessment changes, any rental prohibition, any initial list of construction defects, the latest balcony inspection report and, on request, 12 months of approved board minutes.
Sources
- [1] California Legislative Information, California Business and Professions Code § 11018.2 — Public report required. No one may sell or offer to sell lots or parcels in a subdivision covered by the Subdivided Lands Law without first obtaining a public report from the Real Estate Commissioner. Checked .
- [2] California Legislative Information, California Civil Code § 896 — Construction defect standards. Sets the building standards (for example, windows, roofs, decks and balconies must not let water through) on which a claim against a builder for new residential construction sold as an individual dwelling is based; applies to original construction, not as a substitute for other law on condominium conversions. Checked .
- [3] California Legislative Information, California Civil Code § 941 — Time limit for construction defect actions. Except as the title specifically provides, an action under the construction-defect title must be brought no more than 10 years after substantial completion of the improvement. Checked .
- [4] California Legislative Information, California Civil Code § 4525 — Documents for a prospective purchaser. A selling owner must provide the governing documents, the most recent annual budget report and reserve disclosures, a statement of current regular and special assessments and unpaid amounts, approved but not-yet-due assessment changes, any initial list of construction defects, any rental prohibition, 12 months of approved board minutes on request, and the most recent exterior elevated element (balcony) inspection report. Checked .
- [5] California Legislative Information, California Business and Professions Code § 11013.2 — Purchaser money and blanket encumbrances. If a subdivision's blanket encumbrance lacks a release clause, purchaser money must be held in an escrow acceptable to the Real Estate Commissioner (or protected by a trust, bond or other approved alternative) until a release is obtained. Checked .
- [6] California Legislative Information, California Civil Code § 5550 — Reserve study. At least once every three years the board must have a visual inspection of major components done as part of a reserve study, review it annually, and include components with under 30 years of remaining life, their cost, the annual contribution needed and a funding plan. Checked .
- [7] California Legislative Information, California Civil Code § 5300 — Annual budget report. The annual budget report must include the reserve summary and funding plan, any decision to defer major-component repairs, whether special assessments are anticipated (with amount, start date and duration), outstanding loans, a summary of the association's property, liability, earthquake, flood and fidelity insurance with the statutory warning that it may not cover owners' property, and whether the condominium is FHA- and VA-approved. Checked .
- [8] California Legislative Information, California Civil Code § 5551 — Inspection of exterior elevated elements. In condominium buildings with three or more attached units, a licensed structural or civil engineer or architect must inspect a statistically significant sample of wood-supported balconies, decks, stairways and walkways more than six feet above ground at least every nine years; the first inspection was due by January 1, 2025 (within six years of the certificate of occupancy for buildings permitted on or after January 1, 2020); an element posing an immediate threat must be reported to local code enforcement within 15 days and closed to occupants until repaired. Amended by SB 410, effective January 1, 2026. Checked .
- [9] Fannie Mae, Selling Guide B4-2.1-03 — Ineligible Projects. Projects needing critical repairs, operating like hotels, with more than 35 percent commercial or mixed-use space, or with single-entity ownership above the limits are ineligible; lenders must review each current or planned special assessment, and one tied to an unremediated critical repair makes the project ineligible. Checked .
Data definitions are explained in our methodology, and how we source and correct articles in our editorial policy. This guide is general information, not legal, tax, insurance or financial advice. LA Condo HQ is published by Eltherion, LLC, which is not a licensed brokerage; we can introduce you to a licensed partner agent through our contact page.