ADUs can be sold separately in California. This is thanks to California’s Assembly Bill 1033 (AB 1033), which went into effect on January 1st, 2024.
This bill has revolutionized property sales and ownership in California, making it unique compared to other states.
Why California Stands Out
California is currently the only state that allows the sale of ADUs separately.
California aims to maximize the use of residential land and increase the availability of housing units by allowing the sale of ADUs separately.
A Note On Condominium Conversions
In places like Seattle or Portland, it’s quite common for developers to build a DADU and then sell the two new lots as condominiums.
DADUs are simply detached ADUs, so developers are using loopholes to achieve this by changing the ownership structure. This requires a lot of consulting with experienced planners, and it isn’t as straightforward as selling an ADU in California now due to AB 1033.
What is Assembly Bill 1033?
Assembly Bill 1033, passed by the California Legislature, allows for the separate sale of ADUs from the primary residence by classifying them as a condominium.
This law provides a legal framework ensuring that ADUs can be individually owned and sold, creating new opportunities for homeowners and buyers alike.
Of course, it does come with a lot of intricacies.
How Does AB 1033 Work?
AB 1033 mandates that an ADU can be sold separately if:
- The ADU is built on land owned by a nonprofit organization.
- The land is subject to a recorded tenancy in common (TIC) agreement.
- The ADU meets all local zoning and building codes.
- It meets all requirements of the Subdivision Map Act and local subdivision laws.
- It passes a safety inspection before the condo plan is recorded.
With planning like this, always consult a professional, as there may well be more standards to meet depending on your local jurisdiction.
Partition in Kind
The concept of “partition in kind” plays a critical role in the separate sale of ADUs.
This legal principle allows a property to be divided physically rather than sold and the proceeds split. In the context of AB 1033, partition in kind enables the physical separation of the ADU from the primary residence, facilitating its independent sale.
This is beneficial because it allows co-owners of a property to sell an ADU separately and receive equity from the property rather than one co-owner filing a partition action in court.
Local Governments Need to Opt-In
This one is very important.
For AB 1033 to be effective, local governments must opt-in and adopt the provisions of the bill. This means municipalities have the authority to implement the necessary regulations and frameworks to allow the separate sale of ADUs.
This means that you can’t sell your ADU unless your local jurisdiction has opted in, and so far the only place to do this is San Jose, which opted in June 2024 with the bill going into effect July 18th.
Designated Areas and Height Restrictions
Local governments can decide where ADUs are allowed based on service availability.
This includes sewer and water services and how these can impact public and traffic safety. This means that even if your local government allows ADUs, you might not be allowed to build one in your location.
ADUs must also adhere to specific standards to qualify for separate sales under AB 1033.
These are in addition to the regular rules for ADUs and mainly refer to maximum building height. Local agencies must allow:
- At least 16 feet in height for ADUs on lots with existing or proposed single or multi-family dwelling units.
- At least 18 feet for ADUs on plots with single or multi-family dwelling units that are within ½ mile walking distance of a major transit stop or corridor. This can be extended by 2ft for a roof pitch.
- At least 18 feet in height for ADUs on lots with existing or proposed multifamily, multistory dwellings.
- At least 25 feet in height or the height limit placed by the local zoning ordinance (whichever is larger) for attached ADUs.
By meeting these standards, ADUs ensure they are safe, functional, and harmonious with existing neighborhood structures.
Benefits of Selling an ADU Separately
Selling an ADU separately has a lot of benefits, and not just for the homeowner or developer:
- Increased Housing Options: More homes are available in the market, addressing the housing crisis.
- Affordability: Buyers can purchase smaller, more affordable units.
- Flexibility for Homeowners: Homeowners can monetize their property without selling their primary residence.
FAQs
1. Can you sell an ADU separately in other states?
California is the only state that allows the separate sale of ADUs due to AB 1033.
However, there are workarounds that are being used in other places like Seattle and Portland, where DADUs are built and then sold separately from the main lot after being converted to a condominium.
2. What is a Tenancy in Common (TIC) agreement?
A TIC agreement allows multiple parties to share ownership interests in a property.
Under AB 1033, TIC agreements help to enable the separate sale of ADUs.
3. Are there any restrictions on selling an ADU separately?
Yes, the ADU must comply with local zoning laws and building codes. It must also be built on land owned by a nonprofit and be part of a TIC agreement.
4. How does AB 1033 impact housing affordability?
By allowing the sale of smaller, separate units, AB 1033 increases the availability of affordable housing options.