California’s AB 628: What Commercial Real Estate Brokers & Investors Need to Know
California’s new Assembly Bill 628 (AB 628) marks a significant shift in landlord-tenant law by expanding what is considered “tenantable” housing. Under the amendment to Civil Code § 1941.1, beginning January 1, 2026, rental units whose leases are new, amended, or renewed must include a working stove and refrigerator as part of habitability (i.e., these appliances are no longer optional amenities, but required elements).
For commercial real estate brokers and investors—particularly those with mixed-use buildings, retail-anchored residential components, or properties with tenant spaces that include housing elements—this law introduces new legal, operational, and financial implications.
What AB 628 Means for Brokers & Investors
1. Expanded Liability & Habitability Claims
Because AB 628 places refrigerators and stoves within the habitability standard, landlords may face new risks: malfunctioning appliances could trigger repair-and-deduct claims, rent withholding, or be used as defenses in eviction proceedings.
2. CapEx and Operating Cost Requirements
Properties without these appliances (or in need of appliance upgrades) will require upfront capital expenditures. Beyond purchase cost, many older buildings will need modifications—electrical, gas lines, or structural changes—to support modern appliances. On the operating side, maintenance, replacements, and recall compliance (within 30 days) become landlord responsibilities.
3. Impact on Valuation and Underwriting
Underwriters and lenders may begin adjusting metrics to account for the additional risk and cost load. Cap rates, reserves, and pro forma assumptions may need to reflect the added appliance burden. Investors acquiring or refinancing properties with residential or mixed-use components should model these costs into their valuation.
4. Timing & Lease Structuring Considerations
Since the law only applies to new, amended, or renewed leases starting January 1, 2026, property owners have a window to phase in compliance. Brokers must guide clients on which lease expirations, renewals, or amendments will trigger compliance and how to structure leases to anticipate this.
5. Exemptions & Flexibility
AB 628 does include limited exemptions. It doesn’t apply to units within buildings with communal kitchens, permanent supportive housing, residential hotels, or cases where the tenant and landlord agree in writing that the tenant will provide their own refrigerator under certain conditions. Brokers should confirm whether a particular property qualifies for an exemption.
What to Watch for
For landlords, there’re a few things to watch for under AB 628, which might be costly and time-consuming if not taken care of.
Clarification of “working” standard — What qualifies as a sufficiently functional refrigerator or stove (compact models, older units, etc.)
Recall obligations — Landlords must repair or replace appliances subject to recall within 30 days.
Local ordinance overlays or stricter codes — Some cities may adopt more stringent standards or enforcement in rent-controlled areas.
Rental and market dynamics — The added cost of compliance may compress margins on affordable housing units or reduce yield in thin-margin deals.
Litigation trends — Watch early caselaw or tenant claims to see how aggressively appliance failures are litigated under the new habitability standard.
A Checklist for CRE Brokers & Investors
Audit your portfolio
Identify which units and buildings aren’t compliant or will soon require upgrades, especially for lease renewals in 2026.
Budget and schedule upgrades
Start planning CAPEx now—order appliances, estimate installation, and make necessary infrastructure improvements ahead of time.
Revise lease templates and addendums
Work with legal counsel to include appliance obligations, tenant-supplied appliance clauses (when allowed), maintenance protocols, and clear reporting requirements.
Communicate with clients and operators
Advise your property owners and asset managers on the law changes—share this blog or a one-pager checklist to help them prepare.
Factor cost into underwriting and underwriting due diligence
Include appliance-related reserves and adjust cash flow models to account for this new operating burden.
Monitor enforcement activity and case law
Watch how courts and local jurisdictions interpret AB 628—it will help you refine strategy for future transactions.
AB 628 represents one of the most meaningful habitability updates in decades. If you have more questions about investment properties in California, feel free to reach out to Commercial Brokers International at 310-943-8530 or info@cbicommercial.com.