Is it possible to sell an ADU in CA? What is the California AB 1033?
The California Assembly Bill 1033 is a new law allowing ADUs to be built and sold separately from the primary residence, following the same rules as condominiums. The law was passed on October 11, 2023, and takes effect on January 1, 2024.
Until now, accessory dwelling units were available only as rentals because California state law prevented ADUs from being sold separately. AB 1033 removes this restriction, allowing homeowners to sell ADUs built on their properties. The law applies state-wide, but each city and county can accept or reject the ADU-as-condominium approach for its residents.
What does condo-ization mean for ADUs? Many people imagine a condo as a type of building, but it is a form of property co-ownership. ADU condoization means determining the units that will make up a single property and allocating ownership of separate units to different owners. This process allows two or more parties to legally own distinct parts of the same property without subdividing it.
A condo-ized ADU means that the accessory dwelling unit is part of a co-owned property, with one party owning the primary residence and another owning the ADU. Under these terms, the ADU is considered separate from the main home and can be sold separately.
Benefits Of AB 1033
AB 1033 is a significant change in zoning laws that will create greater density and comes on the heels of SB-9, which permits lot splits. Unfortunately, SB-9 has not been widely adopted due to a lack of uniformity between cities, restrictions, and relatively high cost.
Unlike SB-9, AB 1033 does not require expensive lot line splits, city or county approval, or large parcels of land. Instead, ordinary single-family homes that consume most partitions can be the subject of an in-kind distribution. Specifically, the concept of a partition in-kind allows the property to be physically divided as a resolution of a partition action.
The state passed this law to give homeowners more options for building accessory units, leverage existing equity, increase housing supply, and boost ownership with more affordable options for first-time buyers.
AB 1033 allows homeowners who want to avoid being landlords to build an ADU for sale or sell it to help finance its construction. The hope is that retirees can earn supplemental income and young families can buy an affordable starter home.
AB 1033 Rules & Procedures
The city or county must opt into AB 1033, and a local agency must adopt an ordinance to allow the separate conveyance of the primary house and accessory dwelling unit(s) as condominiums.
As with new condominiums, owners building ADUs for sale must notify the local utilities, including water, sewer, gas, and electric, of the creation and separate conveyance of these units. A homeowners association must be established to manage the maintenance costs of the property's exterior and shared spaces (such as the driveway, a pool, or a common roof).
Like condominiums on one property, the primary residence and the ADU will have two different property taxes and be billed separately.
The accessory dwelling unit will need to be built or developed by a qualified nonprofit corporation and be held according to a recorded tenancy in a common agreement that meets specified requirements. Only some partitions will be a great candidate for an ADU to be sold separately and ultimately provide an appropriate resolution.
