What Lease Clauses Protect ADU Landlords Best?

What Lease Clauses Protect ADU Landlords Best?

Renting out your Accessory Dwelling Unit is one of the smartest ways to generate passive income from your property. But unlike traditional landlording, ADU rentals come with a unique set of challenges. Your tenant lives just steps from your own home. You share property boundaries, possibly utility meters, and certainly a driveway or walkway. Without a well-crafted lease, small misunderstandings can escalate into serious conflicts.

In this guide, we will cover the most important lease clauses that every ADU landlord in California should include, with specific attention to the unique dynamics of renting a unit on your own property. We will also highlight clauses that are legally required under California law and those that are prohibited.

Standard Lease Clauses Every ADU Lease Needs

Before we get into ADU-specific provisions, your lease must include all the standard elements required by California law. These form the foundation of any residential rental agreement.

1. Parties and Premises

Clearly identify all parties to the lease (landlord and all adult tenants) by full legal name. Describe the premises with specificity: the ADU's address (which may be different from the main house), square footage, number of bedrooms and bathrooms, and any included outdoor spaces such as a patio, parking spot, or storage area.

Be explicit about what is not included. If the tenant does not have access to the main house's backyard, garage, laundry room, or pool, state this clearly. Ambiguity in this area is a common source of disputes in ADU rentals.

2. Rent Amount and Payment Terms

Specify the monthly rent amount, due date (typically the 1st of each month), acceptable payment methods, and grace period. California law allows a reasonable grace period before charging a late fee. Most landlords use a 3 to 5 day grace period.

Late fees must be reasonable under California law. Courts have generally upheld late fees of 5-6% of the monthly rent. A $100 late fee on a $2,000 rent is typically considered reasonable; a $500 late fee would likely be struck down as an unenforceable penalty.

3. Security Deposit

California Civil Code Section 1950.5 limits security deposits to one month's rent for unfurnished units and two months' rent for furnished units. As of recent legislation (AB 12), the cap may have been further reduced. State the exact deposit amount, the conditions for its return, and the timeline (21 days after move-out). Never commingle the deposit with your personal funds.

4. Lease Term

Define whether the lease is a fixed-term agreement (e.g., 12 months) or month-to-month. For ADU rentals, many landlords prefer starting with a 12-month lease that converts to month-to-month after the initial term. This provides stability while preserving flexibility.

Remember that under AB 1482 (California's statewide rent control law), tenants who have occupied the unit for 12 months are entitled to just-cause eviction protections regardless of lease terms, unless your ADU qualifies for an exemption.

ADU-Specific Lease Clauses

These clauses address the unique challenges of renting an ADU that shares a property with your primary residence. They are not typically found in standard apartment leases but are essential for ADU landlords.

5. Shared Space and Common Area Rules

Define exactly which areas of the property are shared (e.g., driveway, walkway, trash/recycling area) and establish clear rules for their use. A well-drafted shared space clause should address:

• Driveway and parking: Which spaces belong to the tenant, which to the homeowner, and rules about guest parking
• Trash and recycling: Who takes bins to the curb and returns them, designated days, and sorting requirements
• Walkways and pathways: Right of way for the tenant to access their unit
• Garden and landscaping: Who maintains what, and whether the tenant can plant or modify anything
• Laundry facilities: If shared, specify hours of use and cleaning responsibilities

6. Noise and Quiet Hours

This is perhaps the most important ADU-specific clause. Because your tenant lives in close proximity to your home, noise issues can quickly become intolerable. Establish clear quiet hours (e.g., 10:00 PM to 8:00 AM on weekdays, 11:00 PM to 9:00 AM on weekends) and define what constitutes excessive noise.

Consider including provisions about:

• Music and television volume levels
• Guest gatherings (maximum number of guests, notification requirements for parties)
• Outdoor activities during quiet hours
• Pet noise (barking, etc.)
• Musical instrument practice (if allowed, specify hours)

For more about managing sound between your home and ADU, see our guide on soundproofing between your main house and ADU.

7. Privacy and Access

California law requires landlords to provide 24 hours written notice before entering a rental unit, except in emergencies. For ADU landlords, this is especially important because the close proximity can blur boundaries. Your lease should reinforce the tenant's right to privacy and clearly state that you will not enter the ADU without proper notice.

Consider adding a clause that specifies:

• How notice will be given (text, email, written note on door)
• What constitutes an emergency that allows entry without notice (water leak, fire, gas leak)
• That the landlord will not monitor the tenant's coming and going
• That security cameras on the property, if any, are pointed away from the ADU entrance and windows

8. Utility Responsibility

ADU utility arrangements vary widely. Some ADUs have separate meters for electricity, gas, and water; others share meters with the main house. Your lease must be crystal clear about who pays for what.

If utilities are shared, California law (Civil Code Section 1940.9) requires that you either include utilities in the rent or use a written agreement that specifies the method of allocation. You cannot simply send the tenant an arbitrary bill.

9. Maintenance and Repair Responsibilities

Clearly define who is responsible for what maintenance. As a general rule, the landlord is responsible for maintaining the structure, plumbing, electrical, HVAC, and ensuring the unit is habitable. The tenant is typically responsible for keeping the unit clean and reporting any issues promptly.

ADU-specific maintenance considerations include:

• Landscaping around the ADU (who mows, waters, and maintains?)
• Shared fence maintenance
• Pest control (especially important since the ADU and main house are on the same lot)
• HVAC filter replacement schedule
• Light bulb replacement
• Minor repairs up to a specified dollar amount

10. Pet Policy

ADU pet policies need extra thought because pets in the ADU will share your property. If you allow pets, specify:

• Types and breeds allowed (e.g., dogs under 30 pounds, cats only, no exotic animals)
• Maximum number of pets
• Pet deposit amount (within California legal limits)
• Monthly pet rent, if applicable
• Rules about pets in shared outdoor spaces (leash requirements, waste cleanup)
• Noise provisions specific to pets (barking, etc.)

Note that California law requires landlords to make reasonable accommodations for emotional support animals and service animals, regardless of your pet policy. You cannot charge pet rent or a pet deposit for these animals.

11. Parking and Vehicle Rules

Parking disputes are extremely common in ADU situations, especially in neighborhoods with limited street parking. Your lease should clearly address:

• Number of parking spaces included (if any)
• Location of assigned spaces
• Rules about guest parking
• Restrictions on vehicle types (RVs, commercial vehicles, boats)
• Rules about vehicle maintenance on the property

12. Subletting and Short-Term Rental Prohibition

Most ADU landlords should include a clear prohibition against subletting and short-term rentals. The last thing you want is your tenant listing the ADU on Airbnb while you are living next door. For more on the legal complexities of ADU short-term rentals, see our article on renting your ADU on Airbnb in California.

Clauses That Are Illegal in California

California tenant protection laws are among the strongest in the nation. Several common lease clauses used in other states are unenforceable or illegal in California. Including these in your lease can expose you to liability.

• Waiver of habitability: You cannot include a clause where the tenant agrees to waive their right to a habitable dwelling
• Mandatory arbitration for habitability claims: Tenants cannot be forced to arbitrate habitability disputes
• No-children clauses: Violates the Fair Housing Act and California's Fair Employment and Housing Act
• Excessive late fees: Late fees must be reasonable and reflect actual damages
• Automatic lease renewal without proper notice: California requires adequate notice for renewals
• Waiver of right to security deposit accounting: Tenants are entitled to an itemized accounting within 21 days
• Forfeiture of personal property: You cannot include a clause allowing you to keep abandoned property without following proper legal procedures

Frequently Asked Questions

Do I need a lawyer to draft my ADU lease?

While it is possible to use a template lease, having a California real estate attorney review and customize your lease is highly recommended, especially for ADU rentals. The unique shared-property dynamic and California's complex landlord-tenant laws make professional legal review a worthwhile investment ($300-800 for a lease review).

Can I include a clause that lets me terminate the lease if I need the ADU for family?

California's just-cause eviction requirements (AB 1482) do allow for owner or family member move-in as a just cause for termination, but specific procedures must be followed, including proper notice and potentially relocation assistance. Consult with an attorney about including this provision correctly.

Should I allow pets in my ADU?

Allowing pets expands your tenant pool and can command higher rents. However, given the proximity to your own home, you may want to set reasonable restrictions on size and type. Remember that you must accommodate service animals and emotional support animals regardless of your pet policy.

Can I require renters insurance?

Yes. California allows landlords to require tenants to carry renters insurance as a condition of the lease. This is highly recommended for ADU rentals. Renters insurance protects the tenant's belongings and provides liability coverage, typically costing $15-30 per month.

What if my tenant and I have a dispute about shared spaces?

Your lease should include a dispute resolution process. Many ADU landlords include a mediation clause that requires both parties to attempt mediation before pursuing legal action. Mediation is typically faster, cheaper, and less adversarial than going to court.

How often can I increase rent on my ADU?

For month-to-month tenancies, you can increase rent with 30 days written notice for increases of 10% or less, or 90 days notice for increases over 10%. If AB 1482 applies, annual increases are capped at 5% plus CPI (maximum 10%). Fixed-term leases lock in the rent for the lease duration.

Sample Lease Clause Language for ADU Landlords

Having the right language in your lease agreement is essential for protecting your investment and setting clear expectations with your ADU tenant. Below are sample clauses that California ADU landlords should consider including in their rental agreements.

Occupancy Limits Clause

Your lease should clearly state the maximum number of occupants permitted in the ADU. A sample clause might read: "The premises shall be occupied solely by the individuals named on this lease agreement. The maximum number of occupants is limited to [number] persons. No additional occupants may reside in the unit without the prior written consent of the landlord." This prevents unauthorized subletting and overcrowding, which can lead to excessive wear and potential code violations in a smaller ADU space.

Quiet Enjoyment and Noise Clause

Because ADUs are located on the same property as your primary residence, noise management is especially important. Consider including: "Tenant agrees to maintain a quiet and peaceful environment between the hours of 10:00 PM and 7:00 AM. Excessive noise, loud music, or disruptive gatherings that interfere with the quiet enjoyment of neighboring occupants are prohibited." For more on managing sound between units, see our guide on soundproofing between your main house and ADU.

Parking and Common Area Clause

Define exactly which parking spaces and outdoor areas the tenant may use: "Tenant is assigned [number] parking space(s) located at [specific location]. Tenant shall not park in any other area on the property. Common areas including [describe specific areas] may be used by tenant subject to reasonable scheduling and maintenance expectations."

Utilities Clause

Specify how utilities are divided: "Tenant shall be responsible for the following utilities: [list specific utilities]. Landlord shall be responsible for: [list specific utilities]. If utilities are shared with the main residence, tenant agrees to pay a flat monthly amount of $[amount] to cover their proportional share, payable with monthly rent."

Property Maintenance and Inspection Clause

Include provisions for regular property inspections: "Landlord reserves the right to inspect the premises with 24 hours' written notice to the tenant, as required by California Civil Code Section 1954. Tenant shall maintain the premises in a clean and sanitary condition and shall promptly report any maintenance issues or needed repairs to the landlord."

Common Mistakes ADU Landlords Make

Avoiding these frequent errors will save you time, money, and legal headaches as an ADU landlord in California.

Mistake 1: Using a Generic Lease Template

Standard residential lease forms do not address the unique aspects of ADU rentals, such as shared property access, proximity to the main house, and specific local ADU regulations. Always customize your lease to reflect the specific conditions of your ADU arrangement. An attorney familiar with California landlord-tenant law can review your lease for a few hundred dollars, which is a worthwhile investment.

Mistake 2: Failing to Screen Tenants Properly

Because ADU tenants live on your property, thorough screening is even more important than for a traditional rental. Skipping background checks, income verification, or landlord references to fill the unit quickly often leads to problems down the road. Follow a consistent screening process for every applicant.

Mistake 3: Not Documenting the Unit's Condition

Always complete a detailed move-in inspection with dated photographs of every room, appliance, and fixture. Have both you and the tenant sign the inspection report. Without this documentation, disputes over security deposit deductions become difficult to resolve in your favor.

Mistake 4: Ignoring Local Rent Control Ordinances

Many California cities have rent control ordinances that may apply to your ADU. Under the California Tenant Protection Act (AB 1482), most ADUs built after January 1, 2020 are exempt from local rent control for 15 years after the certificate of occupancy is issued. However, you must verify the specific rules in your jurisdiction, as some cities have additional requirements.

Mistake 5: Neglecting Insurance Updates

Your standard homeowner's insurance policy likely does not cover an ADU rental unit. Failing to update your insurance coverage exposes you to significant financial risk if a tenant or their guest is injured on the property, or if the ADU suffers damage.

Frequently Asked Questions About ADU Lease Clauses

Do I need a lawyer to write my ADU lease?

While California does not require landlords to have an attorney-drafted lease, it is strongly recommended for ADU rentals. The unique aspects of renting a unit on your own property, combined with California's complex landlord-tenant laws, make professional legal review a worthwhile investment. Most real estate attorneys charge $300 to $600 to review and customize a lease agreement for your specific situation.

Can I include a clause prohibiting pets in my ADU?

Yes, you can include a no-pets clause in your lease. However, you cannot refuse a tenant's request for a reasonable accommodation for an emotional support animal or service animal, as these are protected under the Fair Housing Act and California law. If a tenant provides documentation from a licensed healthcare provider supporting their need for an assistance animal, you must allow it regardless of your pet policy.

How much security deposit can I charge for an ADU in California?

As of 2025, California law limits security deposits to one month's rent for most residential rentals, including ADUs. This applies whether the unit is furnished or unfurnished. The deposit must be returned within 21 days of the tenant vacating, minus any documented deductions for unpaid rent, cleaning beyond normal wear and tear, or repair of damages caused by the tenant.

Can I enter my ADU without the tenant's permission?

No. Even though the ADU is on your property, California Civil Code Section 1954 requires landlords to provide at least 24 hours' written notice before entering a rental unit, except in cases of emergency. Your lease should clearly state the procedures for landlord entry, including acceptable reasons and notice requirements.

Should I include a clause about short-term rental restrictions?

Yes, including a clause that prohibits the tenant from subletting or listing the ADU on short-term rental platforms like Airbnb is highly recommended. Many California cities have strict regulations on short-term rentals, and allowing your tenant to operate one could violate local ordinances and create liability issues for you as the property owner.