Can you sell an ADU separately as a condo in California (AB 1033)?

What AB 1033 changed

For years, the answer to "can I sell my ADU?" was mostly no. As the land use firm Reuben, Junius & Rose explains, an ADU generally could not be sold apart from the main house unless a qualified nonprofit built it under a specific tenancy-in-common setup. That narrow path still exists in Government Code section 66341.

AB 1033, signed October 11, 2023, added a second path. The rule now sits in Government Code section 66342. It lets a local agency adopt an ordinance allowing the primary home and its ADU to be sold or conveyed separately as condominiums.

The key word is "lets." The state did not legalize ADU condos everywhere. It gave cities and counties permission to do it if they choose. Your backyard cottage can dream of its own mailbox, but city hall decides whether it gets one.

It only works where your city opted in

Because the law is local opt-in, the first question is not about your ADU at all. It is about your city or county.

San Jose was early. The mayor's office announced in July 2024 that San Jose had become the first city in California to opt into AB 1033, with its local ordinance taking effect that week. Other agencies may have followed since, and some may never act.

The law also requires local agencies that do allow it to put a consumer notice on their ADU submittal checklists and public information, and to make it a standard condition of ADU permits or condo plan approvals. That notice warns owners to confirm that their permitting agency allows ADUs to be sold as condos, and spells out the recording and lender steps that follow.

Before you pay anyone to draw a condo plan, call the planning department and ask one question: "Have you adopted an AB 1033 ordinance, and can I read it?" It is the cheapest phone call in this whole process.

The hoops: condo plan, inspection, lenders and the HOA

Where an ordinance exists, section 66342 requires it to include these conditions:

• Condo law. The condominiums must be created under the Davis-Stirling Common Interest Development Act.
• Subdivision rules. Creation must meet the objective requirements of the Subdivision Map Act and the local subdivision ordinance.
• Safety inspection first. Before the condo plan records, the ADU must pass a safety inspection, shown by a local certificate of occupancy or a housing quality standards report from a HUD-certified inspector.
• Every lienholder consents. No map or condo plan records without each lienholder's written consent, which the lender can refuse or attach conditions to, in its sole and absolute discretion.
• Utilities get notified. The owner must notify the water, sewer, gas and electric providers.
• Existing HOAs get a say. In a planned development with an association, you need the association's express written authorization.

The required consumer notice warns that a lender may require you to pay off or refinance the loan, or approve changes to its collateral. Your lender gets a veto. Lenders love vetoes the way cats love closed doors.

The notice also says the condo plan, and any later change to it, has to be recorded with the County Recorder. That makes this a title and paperwork project as much as a construction one. Budget time for it the way you would budget time for permits.

How an appraiser would look at a condo ADU

My standing rule already treats a detached ADU as its own thing. It never counts in the main house's square footage. It gets valued separately and added on its own line, based on what the market pays for it.

Once the ADU becomes a condo, the split goes further. Each unit is its own property with its own value, and each needs its own comparable sales (recent sales of similar homes). The main house may now have a smaller private yard and no rental unit out back. The ADU is a small home that shares a lot, with an association and shared costs. Both facts can affect what buyers pay.

Reuben, Junius & Rose called the market for ADUs sold as condominiums an unknown quantity. Where few or no ADU condos have sold nearby, an appraiser has to widen the search and measure from sales that buyers treat as similar, such as small condos and small detached homes, then explain the reasoning plainly.

Facts over feelings. Do not assume the two pieces are worth more than the whole. Get both answers before you file: the value together, and each value apart.

Steps before you try to sell an ADU separately

1. Call your planning department and confirm an AB 1033 ordinance has been adopted. Get a copy.
2. Call your lender early. Without every lienholder's consent, nothing records.
3. Check for an HOA. If one exists, ask what board and membership approvals it needs.
4. Hire the right help: a California real estate attorney and a professional who prepares condo plans and subdivision filings.
5. Schedule the safety inspection or confirm you have a certificate of occupancy.
6. Get a before-and-after valuation showing the property as one parcel and each unit separately, so you know whether the split is worth the cost.
7. Ask your CPA about taxes, including property tax and income tax on a sale.

This is general information. Legal rights and procedure depend on the facts, so confirm the details with a California attorney.