In most of California, you cannot sell an accessory dwelling unit separately from the main house. State law treats the ADU as part of the same property, so it transfers when the whole property transfers. The one exception is AB 1033, which took effect January 1, 2024 and lets cities and counties pass local ordinances allowing homeowners to convert their house and ADU into two condominium units that can be sold independently. Whether you can sell your ADU separately in California depends almost entirely on whether your local jurisdiction has adopted that ordinance.
The Default Rule Under State Law
Government Code Section 65852.2 is explicit. An ADU “may be rented separate from the primary residence, but may not be sold or otherwise conveyed separate from the primary residence.”1California Legislative Information. California Government Code 65852.2 Absent a local ordinance opting into AB 1033, that’s the end of the analysis. Your ADU is legally part of the same parcel as your main house, more like a finished basement or an extra bedroom than a piece of standalone real estate.
Selling the property this way requires no special legal steps. The ADU’s value gets folded into the overall appraisal, and the buyer takes the whole parcel in one transaction.
What AB 1033 Actually Changed
AB 1033, signed in October 2023 and effective January 1, 2024, authorizes local agencies to adopt ordinances allowing homeowners to convert their primary dwelling and ADU into separate condominium units, which can then be sold independently.2California Legislative Information. AB-1033 Accessory Dwelling Units: Local Ordinances: Separate Sale or Conveyance The verb is “authorize,” not “require.” The state gave cities and counties permission; it did not give homeowners a right.
The conversion creates a common interest development under the Davis-Stirling Common Interest Development Act, the same framework that governs traditional condominiums in California.3California Legislative Information. California Government Code 65852.2 – Section: Paragraph (a)(10) A separately sold ADU is not a standalone house on its own lot. It is a condominium unit sharing a parcel with the primary residence, with shared common areas, CC&Rs, and the ongoing legal obligations of condo co-ownership.
Check Whether Your City Has Opted In
Adoption has been slow. As of early 2026, very few California jurisdictions have finalized ordinances allowing separate ADU sales under AB 1033. San Diego County approved its implementing ordinance with an effective date of April 4, 2026. Many cities are still evaluating the policy, drafting guidance, or have declined to take it up.
Before you spend anything on surveyors, attorneys, or condo plans, call your local planning department and ask two questions: does the jurisdiction have an active AB 1033 ordinance, and what are its specific requirements? If the answer to the first question is no, a separate sale is not legally possible where you live, regardless of what state law permits.
What the Condo Conversion Actually Requires
If your city allows it, the process involves several concrete steps set by state law. This is not a quick transaction. Expect months of work and several thousand dollars in legal, surveying, and filing fees.
Safety Inspection
Before any condominium plan can be recorded, the ADU must pass a safety inspection. The law accepts either a certificate of occupancy from the local agency or a housing quality standards report from a HUD-certified building inspector.4California Legislative Information. California Government Code 65852.2 – Section: Paragraph (a)(10)(C) Properly permitted ADUs that passed final inspection during construction should clear this step without much difficulty. Unpermitted or partially permitted ADUs face a much harder road, and may need to be brought fully to code first.
Subdivision Map and Condominium Plan
The condominium must comply with the Subdivision Map Act and any local subdivision ordinance.5California Legislative Information. California Government Code 65852.2 – Section: Paragraph (a)(10)(B) In practice that means hiring a licensed surveyor, preparing a condominium plan that defines each unit’s boundaries and the common areas, and recording that plan with the county. You’ll also need Davis-Stirling governing documents (CC&Rs) that spell out shared maintenance responsibilities, insurance, and how the two owners resolve disputes.
Lender Consent
If you have a mortgage, your lender must give written consent before the subdivision map or condominium plan can be recorded. The statute is blunt: a lienholder “may refuse to give consent.”6California Legislative Information. California Government Code 65852.2 – Section: Paragraph (a)(10)(D) There is no override. If the lender says no, the conversion stops. The consent must include the lender’s signature, a legal description of the property, and the identities of all parties with an interest in it, and it must be recorded with the county.
This is where many homeowners will hit a wall. Standard mortgages contain a due-on-sale clause that lets the lender demand full repayment if the ownership structure of the collateral changes. Splitting a single-family property into two condominium units alters that collateral. Lenders have little incentive to consent without payoff or new loan terms, and the statute gives them full discretion to refuse or attach conditions.
HOA Approval
If your property is already part of a planned development with a homeowners association, the HOA must give express written authorization before you can record a condominium plan. That typically requires board approval at a properly noticed meeting, and depending on the governing documents, may require a membership vote.2California Legislative Information. AB-1033 Accessory Dwelling Units: Local Ordinances: Separate Sale or Conveyance
Utilities
Whether your ADU needs separate utility connections depends on how it was built. State law generally bars local agencies from requiring a new or separate utility connection for certain smaller ADUs, particularly those converted from existing space within a home. For larger or newly constructed detached ADUs, local agencies and utility providers may require independent connections, with fees proportionate to size or plumbing fixtures.7California Legislative Information. California Government Code 65852.2
If you’re planning a separate sale, independent metering becomes practically necessary even where it isn’t legally required. A buyer purchasing a condominium unit expects to receive and pay their own utility bills, not split them with a neighbor through an HOA.
Financing Will Be a Hurdle for Your Buyer
Because so few jurisdictions have adopted implementing ordinances, lenders have limited experience underwriting separately sold ADU condominiums. Buyers should expect larger down payments and higher interest rates than on a traditional condo purchase, at least until the market matures and lenders develop standard underwriting for these units. That affects your realistic pool of buyers and the price you can command.
For context, a whole-property sale runs on well-established rails. Fannie Mae allows ADUs in its conventional financing programs, though with limits: the property must be a single-family home with one ADU, and properties with multiple ADUs, two-to-four unit dwellings with an ADU, or manufactured homes serving as the primary residence with an ADU are ineligible.8Fannie Mae. Accessory Dwelling Units A separate condominium sale under AB 1033 does not have that kind of underwriting playbook yet.
Taxes When You Sell
Selling a home with an ADU can create tax situations that don’t come up in a straightforward home sale. What you owe depends largely on whether you lived in the ADU, rented it out, or used it as a guest space.
The Section 121 Exclusion and Rental ADUs
Federal law lets you exclude up to $250,000 in capital gains from the sale of your principal residence ($500,000 for married couples filing jointly), provided you owned and lived in the home for at least two of the five years before the sale.9Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain from Sale of Principal Residence If your ADU is a separate dwelling unit that you rented out rather than used as part of your personal residence, IRS regulations require you to split the gain between the residential and rental portions. Only the gain from the portion you actually lived in qualifies for the exclusion.10eCFR. 26 CFR 1.121-1 – Exclusion of Gain from Sale or Exchange of a Principal Residence
The regulations use an example directly on point: a taxpayer who converts part of a townhouse into a separate rental apartment must allocate gain between the residence portion and the rental unit. A detached rental ADU works the same way.
Depreciation Recapture
If you claimed depreciation on a rental ADU, and the IRS expects you to have done so, you’ll face depreciation recapture on sale. The gain attributable to prior depreciation deductions is taxed at a maximum federal rate of 25%, typically higher than the long-term capital gains rate. Recapture applies whether you sell the ADU separately or as part of the whole property. When selling the entire property, you report the ADU’s depreciable portion and the land separately, allocating the sale price based on fair market value.11Internal Revenue Service. Instructions for Form 4797
California Property Taxes
Under Proposition 13, building an ADU does not trigger a full reassessment of your existing home. The county assessor performs a blended assessment: it estimates the value of the new ADU, usually based on construction cost, and adds that to the current assessed value of the property. Your primary home’s assessed value stays at its existing Prop 13 basis. When you sell the entire property, however, the buyer’s property taxes will be based on the full purchase price, because the sale triggers a complete change-in-ownership reassessment.