California’s AB 1050: Removing Barriers to Housing Redevelopment on Commercial Properties

California’s housing crisis has been exacerbated by structural barriers beyond zoning laws, one of the most persistent being restrictive covenants in the chain of title on commercial properties. These covenants are legal agreements that can control land uses, parking and access and often prohibit residential development on commercial parcels.

Assembly Bill 1050 (AB 1050), signed into law by Gov. Gavin Newsom on Oct. 10, 2025, and effective Jan. 1, 2026, provides potential housing developers with a new tool to dismantle these restrictions on certain commercial properties. For real estate owners, investors, developers and asset managers, this law represents a significant opportunity to convert distressed or underutilized commercial assets into housing.

What’s in the bill?

AB 1050 amends California Civil Code Section 714.6 to expand opportunities to modify or remove restrictive covenants and reciprocal easement agreements (REAs) that block housing development. Specifically, once AB 1050 goes into effect next year, developers that “own or control” the property and have a pending housing project application can submit a request to the county recorder to remove such a real property restriction. The submission package should include a copy of the original recorded restrictive covenant, a completed Restrictive Covenant Modification form provided by the relevant county and any supporting documentation that demonstrates why the project is eligible. Once the materials are submitted, the county recorder must forward the submission to county counsel within five business days of receipt. County counsel then has up to 15 days to approve or reject the modification request.

Previously, this process was limited to 100% affordable housing projects under AB 721 (2021). AB 1050 broadens the scope to include any housing as long as it complies with state housing laws and local zoning regulations.

Key provisions include:

• Covenants and reciprocal easement agreements that prohibit residential use or otherwise limit density or occupancy will be unenforceable after the Restrictive Covenant Modification Document (RCMD) is recorded.
• The property must be “owned or controlled” by the entity or individual that submits a development project application to redevelop the existing commercial property. “Controlled” is defined as “includ[ing], without limitation, the right to acquire the property under an option agreement, purchase and sale agreement, or similar agreement.” However, the individual or entity that submits the Restrictive Covenant Modification request is prohibited from recording the RCMD until they close escrow on the property and become its record title owner.
• Projects must still comply with zoning, building codes and fair housing laws. Habitat or agricultural conservation easements recorded before 2022 remain protected.
• Property owners must notify anyone who has an interest in the property or in the restrictive covenant via certified mail or public notice before recording the RCMD.

Looking Ahead

The COVID-19 pandemic accelerated societal shifts in retail and office demand, leaving many properties underutilized. AB 1050 presents an opportunity for adaptive reuse by unlocking value in legacy properties weighed down by outdated restrictions and optimizing portfolios by leveraging the bill to transform underperforming properties into revenue-generating housing projects. We note, however, that this new process remains untested and may lead to litigation since it is a mechanism to unilaterally modify property rights.

This document is intended to provide you with general information regarding AB 1050 in California. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.