AB 1033 ADU Condo Sale in LA (2026)
Assembly Bill 1033, signed October 11, 2023 and codified at Gov Code §65852.26 effective January 1, 2024, is the single biggest legal shift for California ADUs since the 2017 by-right statute. It lets a homeowner sell an ADU as a separate condominium unit on the same parcel — but only if the local jurisdiction has opted in. This guide walks the opt-in map as of April 2026, the HOA formation requirement, the lender-consent deal-killer, the tenant notice periods, the property-tax reassessment mechanics, and the legal documents you actually need to record to create a two-unit Common Interest Development on a single-family parcel.
What AB 1033 actually does — the statutory mechanism
Gov Code §65852.26 authorizes a local government to adopt a local ordinance permitting the sale or conveyance of an ADU separate from the primary dwelling if specific conditions are met.
Conditions include: ADU meets all applicable code, a condominium plan is recorded consistent with the Davis-Stirling Common Interest Development Act (Civ Code §4000 et seq.), a homeowners association is formed, each lender on the property consents to the conversion, and the tenant (if any) receives written notice.
Before AB 1033, California law treated ADUs as accessory to the primary dwelling and did not permit separate conveyance. This constrained ADUs to rental-income or multigenerational use only.
The opt-in map — who said yes as of April 2026
Opted in (separate-sale permitted): Berkeley (Ord. 7842-NS, 2024), Oakland (Ord. 13752 CMS, 2024), San Jose (Ord. 30934, 2024), San Diego (Ord. O-21646, 2025), Glendale (Ord. 6033, 2025), West Hollywood (Ord. 24-1211, 2025), Santa Cruz (2024), El Cerrito (2024).
Not opted in: city-of-LA, Santa Monica, Beverly Hills, Culver City, Long Beach, Burbank, Pasadena, Manhattan Beach, Hermosa Beach, Malibu, all unincorporated LA County.
City-of-LA Planning Department tabled a draft opt-in ordinance in September 2025 citing concerns about HOA formation costs for low-income homeowners. No scheduled vote as of April 2026.
If you are considering an ADU investment with future separate-sale optionality, the opt-in jurisdictions materially change resale math. Glendale and West Hollywood are the closest opt-in cities to LA proper.
The HOA formation requirement — the friction everyone underestimates
Gov Code §65852.26(a)(6) requires formation of a Common Interest Development (CID) under Davis-Stirling, which means a homeowners association governing the two-unit (or more) parcel.
The HOA must have CC&Rs (Covenants, Conditions, and Restrictions), a budget, a reserve study, and governance documents. Legal cost to stand up the HOA: $4,500–$12,000 in 2026 California.
Annual HOA operating cost for a two-unit CID: $1,800–$4,200 between insurance, reserves, and state-mandated filings including the biennial Davis-Stirling election under Civ Code §5100.
Ongoing complexity includes the Civ Code §5300 budget-disclosure statement, Civ Code §5510 election rules, and the Horizontal Property Regimes Act for unit-boundary definition.
Lender consent — the deal-killer no one sees coming
Gov Code §65852.26(a)(7) requires each existing mortgage lender on the property to consent in writing to the ADU condominium conversion before recording.
Most conventional mortgages have a due-on-sale clause (Garn-St Germain Depository Institutions Act, 12 USC §1701j-3) that technically treats a condo conversion as a transfer. Lenders can require the mortgage to be paid off or refinanced as a condition of consent.
Fannie Mae and Freddie Mac have not issued standardized guidance for AB 1033 conversions as of 2026. Most LA-based lenders handle requests case-by-case and many decline.
Practical tip: if you plan to use AB 1033 after the ADU is built, start the lender conversation before you finalize the ADU design. A lender refusal post-construction means the unit stays a rental only.
Property tax — the Prop 13 reassessment mechanics
Under Rev & Tax Code §75.10, the sale of a condo-converted ADU is a change of ownership that triggers full reassessment of the unit to current market value.
The primary dwelling is not reassessed unless it is also sold. So a homeowner who builds an ADU, converts to condo, sells the ADU, and retains the primary retains their Prop 13 basis on the primary.
The buyer of the ADU pays property tax on the ADU's full 2026 market value — typically 1.0–1.25% of value annually including LA County voter-approved overrides.
Legal documents required for a two-unit CID
Declaration of Covenants, Conditions, and Restrictions (CC&Rs): the master governance document recorded against both units. Covers use restrictions, maintenance responsibilities, architectural controls, and dispute resolution.
Articles of Incorporation: files the HOA as a California nonprofit mutual-benefit corporation under Corp Code §7110 et seq.
Bylaws: procedural rules for HOA meetings, elections, voting, and officer roles.
Condominium Plan: the technical document showing unit boundaries, common areas, and limited common areas (exclusive-use easements like a patio or parking space).
Public Report (if sale is imminent): California Department of Real Estate approves a Public Report per Bus & Prof Code §11010 before units can be sold to the public. Typical issuance 60–120 days from application.
Common lender objections and how they resolve
Primary lender worried about collateral value: the ADU conversion changes the security from a single-family dwelling to a multi-unit condo. Resolution typically involves a new appraisal proving combined unit values meet or exceed original loan-to-value.
Primary lender worried about payoff priority: the condo conversion could reorder liens. Resolution: a subordination agreement or loan modification that clarifies lender priority on the primary dwelling unit.
Primary lender with Fannie Mae or Freddie Mac backing: these loans require GSE-approved documentation. Without formal GSE guidance on AB 1033, the lender may decline or require loan payoff/refinance.
Second lien holders (HELOC, home-equity loan): same consent requirement as the first lien. A HELOC can sometimes be closed and the balance rolled into a refinance to clear the consent problem.
Tenant rights when an ADU is converted to condominium
Gov Code §65852.26(a)(8) requires written notice to any existing ADU tenant at least 60 days before condominium conversion recording.
California Civ Code §1954.535 gives tenants in converted ADUs a right of first refusal to purchase the unit at the recorded sale price for 90 days from notice.
Ellis Act (Gov Code §7060) protections apply if the owner intends to withdraw the ADU from the rental market rather than sell. Ellis Act notice periods run 120 days minimum, extending to 12 months for tenants over 62 or disabled.
LA-specific overlay: LAMC §151.30 (Rent Stabilization Ordinance) does not currently cover single-family detached homes and their ADUs, but city policy has been to expand RSO-like protections to certain multi-dwelling parcels over time. Check current LAMC before acting.
Condominium plan and tentative map — the recording mechanics
Gov Code §65852.26(a)(4) cross-references the Subdivision Map Act (Gov Code §66410 et seq.) which treats a condo conversion of an ADU as a subdivision requiring a tentative map and final map.
LA County Recorder files the final condominium plan after LADBS sign-off on the ADU, after the surveyor and civil engineer produce the plan, and after the HOA governance documents are recorded.
Recording fees: $95 base plus $14 per additional page under Gov Code §27361. A typical two-unit condominium plan runs 40–80 pages, totaling $650–$1,200 in recording fees.
The condominium plan legally defines unit boundaries, common areas, and limited common areas. Unit boundary definition matters for insurance (walls-in vs walls-out coverage), for tax assessment, and for future remodeling (a unit owner cannot remodel into common area without HOA consent).
Insurance and title implications on a condo-converted ADU
Condo-converted ADUs need a separate CAL-insured condo policy (Civ Code §5805 requires the HOA to maintain a master policy, and each unit owner typically carries an HO-6 walls-in policy).
Title insurance: the title company issues a separate CLTA or ALTA 2006 policy on each condominium unit at sale. Title insurance cost is a one-time 0.4–0.6% of unit value in LA County.
Mello-Roos and assessment districts do not change with condo conversion — the original parcel's tax assessments pass through to the CID and are allocated to individual units under the condominium plan.
The CID is subject to the Davis-Stirling Open Meeting Act (Civ Code §4925) and must provide annual financial disclosures under Civ Code §5300. These are light burdens on two-unit CIDs but real ones.
When AB 1033 makes sense and when it does not
Makes sense: you are in an opt-in jurisdiction, you have a stable primary-residence mortgage willing to consent, you want a liquidity-event exit on the ADU equity, and you are comfortable with HOA governance.
Does not make sense: you are in city-of-LA and the opt-in is years away, you need the ADU as long-term rental income, your lender will not consent, or the administrative friction of a two-unit CID exceeds the liquidity benefit.
If your jurisdiction is not yet opted in, build the ADU as a standard rental under Gov Code §65852.2, then monitor the local opt-in ordinance. The ADU does not need to be redesigned later to qualify — only recorded under the condominium plan.
Design-forward considerations for a future AB 1033 opt-in: separate utility meters for each dwelling from day one, fire separation per CBC Table 602 between units in attached configurations (1-hour rating minimum), and boundary walls that clearly delineate each unit. Retrofitting these after construction is expensive.
For the full ADU design-build pipeline that accounts for future AB 1033 optionality, see: https://askbaily.com/adu-construction-los-angeles
Still have questions?
Ask Baily — pre-seeded for this topic.
Loading chat…
Who is Baily?
Baily is named after Francis Baily — an English stockbroker who retired at 51, became an astronomer, and in 1836 described something on the edge of a solar eclipse that nobody had properly articulated before: a string of bright beads of sunlight breaking through the valleys along the moon’s rim.
He wasn’t the first to see them. Edmond Halley saw them in 1715 and barely noticed. Baily’s contribution was clarity — describing exactly what was happening, in plain language, so vividly that the whole field of astronomy paid attention. The phenomenon is still called Baily’s beads.
That’s what we wanted our AI to do. Every inbound call and text has signal in it — a homeowner’s real question, a timeline, a budget, a hesitation that means “yes but.” Baily listens to every one, 24/7, and finds the beads of light.
Baily was a businessman before he was a scientist. That’s our vibe too.