The ADU is finished, the tenant just gave notice, and you find yourself doing the math the other way around: what if you sold the little unit instead of renting it? A friend mentions that the law changed, and it did. But "the law changed" here means something narrower than it sounds — it created a permission for cities, not a right for owners, and the bank holding your mortgage gets a vote.
The short answer: an ADU generally cannot be sold apart from the main house. There are two exceptions: a local agency may adopt an ordinance allowing the primary unit and the ADU to be separately conveyed as condominiums, and a narrow nonprofit-built path lets qualified low-income buyers purchase an ADU separately (ADU Handbook, Sales and Separate Conveyance).
Key points
| Path | Who decides | Where it comes from |
|---|---|---|
| Condominium conveyance | Your city, by adopting an ordinance — it is optional | ADU Handbook, Sales and Separate Conveyance |
| Nonprofit / qualified buyer path | State law: the agency shall allow it where conditions are met | § 66341 |
| Lender consent | Required in writing before the condominium plan is recorded | § 66342 |
| Affordability term, nonprofit path | 45 years of owner-occupied low-income housing | § 66341(c) |
| Junior ADUs | May not be sold separately | ADU Handbook, AB 345 |
Path one: the condominium route
The 2023 legislation people refer to as AB 1033 — together with AB 976 — authorized a local agency to adopt a local ordinance allowing the separate conveyance of the primary dwelling unit and the ADU as condominiums, subject to conditions (ADU Handbook, AB 976 and AB 1033).
The word doing the work is authorized. This is not something a city must allow, and it is not something you can do because state law says so. Your first question to the planning counter is simply whether your jurisdiction has adopted such an ordinance. Many have not.
Where a city does allow it, the state sets out what the process must include:
- Condominiums created under the Davis-Stirling Common Interest Development Act.
- Creation in conformance with the Subdivision Map Act.
- A safety inspection of the ADU before the condominium plan is recorded.
- Lienholders' consent before recordation of the subdivision map or condominium plan.
- Consumer notice from the local agency about the requirements, the establishment of the condominium and lienholder consent.
- Homeowner notice to utilities.
- Where the property sits in an existing planned development, express written authorization from the association.
The same legislation removed owner-occupancy from the picture for ADUs generally: a local agency is prohibited from requiring owner-occupancy for an accessory dwelling unit (ADU Handbook, AB 976 and AB 1033).
Your lender is the real gatekeeper
State law requires a consumer notice with specific language, and reading it is the fastest way to understand what you are signing up for. It opens by telling owners to make sure their building permitting agency allows the practice at all, then explains that the condominium plan — and any future modification of it — must be recorded with the County Recorder, and that before recording, any lienholder with a lien on your title must provide written consent clearly stating that the lender approves recordation and that you have satisfied its terms (§ 66342).
The notice then lists what securing that consent may cost you:
- Paying off your current lender. You may pay off the mortgage and any liens through a refinance or a new loan — and the notice warns that refinancing may change your interest rate or tax basis.
- Lender approval of a change to its collateral, since your single legal description becomes one or more condominium parcels.
- Lender consent to the details of any construction loan or ground lease, potentially including a copy of the improvement contract with a licensed contractor, evidence that you have the funds to complete the work, and a signed statement that the information is true.
Two more obligations sit at the end of the section: if the ADU is established as a condominium, the local government must require the homeowner to notify utility providers — water, sewer, gas and electricity — of the condominium creation and separate conveyance; and the owner of a property or separate interest within an existing planned development with an association has further requirements to meet (§ 66342).
If you carry a mortgage on the property, treat lender consent as the first call rather than the last. A refinance at today's rate — and a possible reassessment of your tax basis — can outweigh the gain from selling the unit.
Path two: the nonprofit and qualified-buyer route
The second route is mandatory on cities but narrow in who can use it.
A local agency shall allow an accessory dwelling unit to be sold or conveyed separately from the primary residence to a qualified buyer
— if all of the following apply (§ 66341):
- The ADU or the primary dwelling was built or developed by a qualified nonprofit corporation.
- There is an enforceable restriction on the use of the land under a recorded contract between the qualified buyer and the nonprofit, meeting the requirements of Revenue and Taxation Code section 402.1.
- The property is held under a recorded tenancy in common agreement that allocates each buyer an undivided, unequal interest based on the size of the dwelling they occupy; includes a repurchase option requiring the buyer to offer the unit to the nonprofit first; requires each buyer to occupy their unit as a principal residence; and imposes affordability restrictions preserving the units as low-income housing for 45 years, with resale only to qualified buyers. Agreements recorded after December 31, 2021 must also delineate exclusive-use areas, allocate cost responsibilities, and set out dispute-resolution procedures.
- A grant deed naming grantor, grantee and the interests transferred is recorded in the county, with a Preliminary Change of Ownership Report filed alongside.
- If the utility serving the primary residence requests it, the ADU has a separate water, sewer or electrical connection.
This is the AB 345 framework, aimed at nonprofit-developed affordable ownership housing rather than at ordinary homeowners (ADU Handbook, AB 345).
Importantly, this path does not close off the other one: nothing in it limits the ability of an ADU to be sold or conveyed separately as a condominium under an ordinance adopted per section 66342 (§ 66341(f)).
Junior units are excluded
Junior accessory dwelling units cannot be sold separately at all. The nonprofit path does not apply to them, and local ordinances must continue to prohibit JADUs from being sold separately from the primary residence (ADU Handbook, AB 345). A junior unit sits inside the walls of the house, so there is nothing to convey independently.
Where to start
Three questions, in this order: Has my city adopted an ordinance allowing ADU condominium conveyance? Will my lender consent, and on what terms? And is my property in a planned development with an association whose written authorization I would need? A no at any one of them ends the condominium route before you have spent anything on a surveyor.
One more useful side effect of the 2023 changes, whether or not you ever sell: a local agency may not require you to live on the property, which means renting both units is on the table (ADU Handbook, AB 976 and AB 1033). The California Department of Housing and Community Development publishes the guidance these rules come from at hcd.ca.gov.
Sources
- Sales and Separate Conveyance — 2025 California ADU Handbook (HCD)
- AB 976 and AB 1033 — 2025 California ADU Handbook (HCD)
- AB 345 — 2025 California ADU Handbook (HCD)
- § 66341 — Separate conveyance to a qualified buyer (Government Code)
- § 66342 — Condominium conveyance and consumer notice (Government Code)
