Can You Sell Just the ADU Without Selling the Main House?

Can You Really Sell an ADU Separately in California?

One of the most common questions California homeowners ask after building an Accessory Dwelling Unit (ADU) is whether they can sell that unit independently from the primary residence. For decades, the answer was a firm no. ADUs were tied to the main property, meaning any sale included the entire parcel. However, recent California legislation has begun to open the door to separate ADU sales under specific conditions, creating an entirely new opportunity for homeowners looking to monetize their investment.

The landscape changed significantly with the passage of Assembly Bill 1033 (AB 1033) in 2024, which introduced a pathway for local jurisdictions to allow the separate sale of ADUs through condominium-style arrangements. Combined with Senate Bill 9 (SB 9) lot split provisions and traditional condo conversion strategies, California homeowners now have more options than ever before. However, the rules are complex, vary by city, and require careful legal and financial planning.

In this comprehensive guide, we will cover every legal pathway for selling an ADU separately, the specific requirements and limitations of each approach, the costs involved, and the practical steps you need to take. Whether you are planning to build an ADU specifically for resale or exploring options for an existing unit, this article will give you the complete picture.

The Historical Ban on Separate ADU Sales

To understand where we are today, it helps to know why separate ADU sales were prohibited in the first place. California's ADU laws, which gained momentum with AB 2299 and SB 1069 in 2017, were designed to increase housing density without changing the fundamental ownership structure of single-family neighborhoods. The state wanted more rental units, not more condo-style subdivisions.

Under these original rules, ADUs were required to remain on the same parcel as the primary dwelling. They could not be sold independently, and they could not be subdivided from the main lot. This was codified in Government Code Section 65852.2(e)(1), which explicitly prohibited the separate conveyance of ADUs. The reasoning was straightforward: allowing separate sales could complicate zoning, create HOA-like governance issues, and potentially reduce the supply of rental housing that ADU legislation was intended to create.

However, as California's housing crisis deepened and property values continued to climb, policymakers began to reconsider this restriction. Homeowners who had invested $150,000 to $400,000 or more in building an ADU wanted flexibility in how they could recoup that investment. Selling the ADU separately could unlock equity, allow homeowners to downsize by selling the main house while keeping the ADU, or create more affordable homeownership opportunities.

Why Homeowners Want to Sell ADUs Separately

There are several compelling reasons homeowners seek to sell their ADU as a standalone property:

• Unlocking equity without selling the entire property
• Creating affordable homeownership opportunities for first-time buyers
• Downsizing by moving into the ADU and selling the main house with the lot
• Estate planning to divide property among heirs
• Investment returns by building specifically for resale
• Retirement funding for homeowners who need to liquidate part of their property

AB 1033: California's New ADU Separate Sale Law

Assembly Bill 1033, authored by Assemblymember Phil Ting and signed into law by Governor Gavin Newsom in October 2023, represents the most significant change to ADU ownership rules in California's history. The law took effect on January 1, 2024, and provides a framework for cities and counties to allow the separate sale of ADUs.

How AB 1033 Works

AB 1033 does not automatically allow homeowners to sell their ADUs separately. Instead, it creates a voluntary opt-in framework for local jurisdictions. Here is how the process works:

1. Local adoption: A city or county must pass its own ordinance opting into AB 1033
2. Condominium conversion: The ADU must be converted to a condominium unit through the subdivision map process
3. CC&Rs creation: Covenants, Conditions, and Restrictions must be established for the shared property
4. Separate title: Once the condo map is recorded, the ADU receives its own title and can be sold independently

Key Requirements Under AB 1033

Which Cities Have Adopted AB 1033?

As of early 2026, adoption of AB 1033 has been gradual. Some cities that have adopted or are actively considering adoption include several jurisdictions in the greater Los Angeles area, the Bay Area, and San Diego County. However, many cities have been slow to act, and some have expressed concern about the implications of condo-style ADU ownership.

Before pursuing an AB 1033 sale, contact your local planning department to confirm whether your jurisdiction has adopted the necessary ordinance. If your city has not yet opted in, you may want to advocate for adoption or explore alternative pathways described later in this article.

SB 9 Lot Splits: An Alternative Pathway

While AB 1033 focuses on condo-style conversions, Senate Bill 9 offers a different approach through lot splitting. SB 9, which took effect in 2022, allows homeowners to split a single-family lot into two separate parcels, each of which can contain up to two units.

How SB 9 Lot Splits Work for ADU Separation

Under SB 9, you can potentially:

1. Split your lot into two separate parcels, with the ADU on one parcel and the main house on the other
2. Create separate APNs (Assessor's Parcel Numbers) for each lot
3. Sell the ADU parcel independently with its own deed and title

SB 9 Requirements for Lot Splits

One significant limitation of the SB 9 approach is the three-year owner-occupancy requirement. You must sign an affidavit confirming that you intend to occupy one of the resulting parcels as your primary residence for at least three years after the split. This limits speculative lot splitting but still provides a viable path for homeowners who plan to stay in one of the units.

Traditional Condo Conversion for ADUs

Even before AB 1033, some homeowners explored traditional condo conversion as a way to create separate ownership for an ADU. This process involves converting the entire property into a condominium project with two or more units, each of which can be individually owned and sold.

Steps for Condo Conversion

1. Hire a surveyor to prepare a condominium map
2. Engage an attorney to draft CC&Rs, bylaws, and other governing documents
3. Submit the application to your local planning department
4. Comply with building codes for fire separation, sound insulation, and accessibility
5. Record the condominium plan with the county recorder
6. Obtain separate parcel numbers for each unit

Costs of Condo Conversion

While traditional condo conversion is available in many jurisdictions, it can be significantly more expensive and time-consuming than the AB 1033 pathway. Some cities also have specific restrictions on condo conversions that may limit eligibility.

Financial Considerations When Selling an ADU Separately

Before pursuing separate ADU sales, consider the financial implications carefully. Selling part of your property has tax, mortgage, and valuation consequences that can significantly impact your bottom line.

Tax Implications

When you sell an ADU separately, the IRS treats it as a sale of real property. Key tax considerations include:

• Capital gains: You may owe capital gains tax on the profit from the sale. The cost basis will include the construction costs of the ADU plus a proportional share of the land value.
• Primary residence exclusion: If you have used the ADU as your primary residence for at least two of the five years before the sale, you may qualify for the Section 121 exclusion (up to $250,000 for individuals, $500,000 for married couples).
• Depreciation recapture: If you have been renting the ADU and claiming depreciation, you may owe depreciation recapture tax at a rate of up to 25%.
• Property tax reassessment: The sold portion will be reassessed at market value under Proposition 13, while the retained portion keeps its existing assessed value.

Mortgage Considerations

If your property has an existing mortgage, selling the ADU separately is more complicated:

• Due-on-sale clause: Most mortgages include a due-on-sale clause that could trigger full repayment when you sell part of the property.
• Lender approval: You will likely need your lender's consent to subdivide or convert the property.
• Refinancing: You may need to refinance the remaining property after the ADU is sold.
• Subordination: In some cases, lenders may agree to subordinate their lien to allow the conversion, but this is not guaranteed.

Valuation and Pricing

Determining the value of a separately sold ADU requires careful appraisal. Factors that affect ADU value include:

• Square footage and number of bedrooms/bathrooms
• Quality of construction and finishes
• Location and neighborhood desirability
• Comparable sales of condos or small homes in the area
• Shared amenities and common area maintenance obligations
• Parking availability
• Outdoor space allocation

In the Los Angeles market, a well-built 600 to 800 square foot ADU sold separately could potentially fetch $300,000 to $600,000 or more, depending on location and market conditions. This represents a significant return on a construction investment of $150,000 to $300,000.

Practical Steps to Sell Your ADU Separately

If you have decided to pursue separate sale of your ADU, follow these steps to navigate the process effectively:

Step 1: Research Your Local Rules

Contact your city's planning department to determine which pathways are available in your jurisdiction. Ask specifically about:

• Whether your city has adopted AB 1033
• SB 9 lot split eligibility for your property
• Traditional condo conversion requirements
• Any local overlay zones or specific plan restrictions

Step 2: Consult with Professionals

Assemble a team of professionals before moving forward:

• Real estate attorney: To guide you through legal requirements and draft necessary documents
• Land surveyor: To prepare subdivision or condominium maps
• Real estate appraiser: To determine fair market value of each unit
• Tax advisor: To understand capital gains, depreciation recapture, and property tax implications
• Mortgage lender: To address existing loan requirements and refinancing options

Step 3: Ensure Your ADU Meets Requirements

Your ADU must meet all building code requirements for separate ownership, including fire separation, independent utility connections, separate entrances, and adequate parking. If your existing ADU does not meet these requirements, you may need to make upgrades before proceeding.

Step 4: File Applications and Record Documents

Submit all necessary applications to your local jurisdiction, pay required fees, and work with your attorney to record the condominium plan or lot split map with the county recorder. This process typically takes 3 to 12 months depending on the pathway and local processing times.

Step 5: Market and Sell the ADU

Once the ADU has its own title, work with a real estate agent experienced in condo or small-home sales to market the property. Highlight the unique benefits of ADU ownership, such as affordability, low maintenance, and proximity to established neighborhoods.

Common Challenges and How to Overcome Them

Selling an ADU separately is not without its challenges. Here are the most common issues homeowners face and strategies for addressing them:

Challenge 1: Local Jurisdiction Has Not Adopted AB 1033

If your city has not opted into AB 1033, consider advocating for adoption at city council meetings, or explore SB 9 lot splits as an alternative. You can also work with local housing advocacy groups to push for implementation.

Challenge 2: Existing Mortgage Complications

Speak with your lender early in the process. Some lenders will work with you to modify the loan terms, while others may require full payoff. If necessary, explore refinancing options that account for the new property structure.

Challenge 3: Shared Infrastructure Concerns

When two units share a parcel (even with separate titles), there are ongoing questions about shared driveways, landscaping, utility lines, and structural elements. Well-drafted CC&Rs can address most of these concerns, but they require careful legal drafting.

Challenge 4: Buyer Financing Difficulties

Buyers of separately sold ADUs may face challenges obtaining traditional mortgages, especially if the condo project has only two units. Some lenders have minimum unit requirements for condo financing. FHA and VA loans may have additional restrictions.

Challenge 5: HOA-Style Governance for Two Units

Creating a two-unit HOA can feel burdensome. However, basic CC&Rs are necessary to govern shared expenses, maintenance responsibilities, and dispute resolution. Keep the documents as simple and practical as possible.

Comparing Your Options: AB 1033 vs. SB 9 vs. Condo Conversion

Frequently Asked Questions

Can I sell my ADU separately right now?

It depends on your location. If your city has adopted AB 1033, you can pursue the condo conversion pathway. Alternatively, if your lot meets SB 9 requirements, you can pursue a lot split. Contact your local planning department to determine which options are available.

How much does it cost to make an ADU sellable separately?

The total cost ranges from $10,000 to $100,000 or more, depending on the pathway you choose, necessary building upgrades, legal fees, and local application costs. The AB 1033 pathway is generally the least expensive option.

Will I need to pay capital gains tax when I sell my ADU?

Likely yes, unless you qualify for the Section 121 primary residence exclusion. The amount depends on your cost basis (construction costs plus allocated land value) and the sale price. Consult a tax advisor for your specific situation.

Can I sell the main house and keep the ADU?

Once the property is converted (through AB 1033, SB 9, or condo conversion), either unit can be sold independently. So yes, you could sell the main house and retain ownership of the ADU.

What happens to shared utilities when I sell the ADU separately?

Most pathways require that the ADU have independent utility connections before separate sale. This includes separate meters for electricity, gas, and water. The CC&Rs or lot split agreement will also address shared infrastructure like sewer lines, driveways, and landscaping.

Can I build an ADU specifically to sell it?

Yes, but you must comply with all owner-occupancy requirements that apply to your chosen pathway. Under SB 9, you must live on the property for three years. Under AB 1033, the requirements depend on your local ordinance. Building an ADU for resale can be a profitable strategy, but plan carefully with your ADU builder from the beginning.

Do HOAs affect my ability to sell an ADU separately?

If your property is in an HOA, you may face additional restrictions. While California law prohibits HOAs from banning ADUs entirely, the separate sale of an ADU may trigger additional HOA review, fees, or restrictions. Check your HOA's CC&Rs and consult an attorney.