According to TMZ, a judge in the L.A. Superior Court last week (ends November 24) ruled the half-built, 30,000-square-foot Bel Air property is a "danger to the community" and poses a "clear and present" threat to neighbours for not being up to code.
"If this house came down the hill it would take a portion of the neighbourhood with it," said Judge Craig Karlan.
Neighbours sued the 71-year-old property tycoon over the structure, with an engineer testifying that the piles supporting the huge home were only driven 20 feet into the bedrock - instead of 30 feet required by building regulations.
"This seems to me to be a clear cut case where the property must come down," Karlan said, reported Britain's Daily Mail newspaper. "We're not talking about an extra wall or a different way into the kitchen. We're talking about the most significant aspect of the structure – the foundation."
Although Hadid's lawyer insisted the house is still safe, the judge ordered the property be demolished, at a cost of $5 million (£3.9 million).
After the judge's ruling, Hadid told TMZ his house "has not moved a millimetre", insisting: "It has never been an imminent danger to the neighbours."
He added city inspectors observed construction, which began in 2012, and was angry no one had raised the alarm before he spent millions.
The ex-husband of Yolanda Hadid is currently on three years' probation after pleading no contest to criminal charges for building code violations, on the condition he either complies with building regulations or tears the mansion down by 1 April.
A hearing in that case is set for 13 December, TMZ reported.