By Eric Engelbert
California's housing market is entering a new era with the enactment of Assembly Bill (AB) 1033, effective January 1, 2024, allowing for the separate sale of Accessory Dwelling Units (ADUs) from the main house. This legislative change is particularly interesting in coastal areas where housing demand and innovative housing solutions are constantly evolving.
However, for regions like Orange County, particularly along the coast, the prospect of implementing these changes seems less likely. Coastal cities in Orange County, such as those in the Newport Coast area, are expected to be resistant to lot splits and condo conversions. It's unlikely that homeowners in these affluent areas would approve attempts to sell ADUs separately or even approve ADUs in their neighborhoods.
For some areas of Orange County, this Bill will be effective. Fullerton, Anaheim, and Santa Ana may be the first communities to take advantage of this new opportunity. Search properties with a second unit or ADU at this link.
As of the latest information available, it's unclear which municipalities in Orange County, or elsewhere in California, have decided to adopt these new provisions. The local government's decision to opt-in is crucial for homeowners interested in selling their ADUs separately.
Understanding AB 1033
Traditionally, ADUs in California were inseparable from the main property. AB 1033 changes this by removing state-level restrictions and empowering local governments to permit the separate sale of ADUs. This law aims to increase affordable homeownership opportunities and offer more flexibility in property management. However, it's essential to note that while the state law enables this possibility, the final decision rests with local jurisdictions.
The Process and Requirements
Selling an ADU separately involves several steps and adherence to specific regulations.
Local Government Ordinance: Check with your local government, as the separate sale of ADUs is subject to local ordinances under AB 1033. As of now, the response from different regions, including Orange County, varies, with some areas still developing policies.
Condominium Conversion (Condo Mapping): This process is necessary for transforming a single property into multiple, individually owned units. It involves a preliminary assessment, compliance with local regulations, and recording a condominium plan. On a side note, these condo conversions have been popular over the past 20 years for properties with 2 or more units. Most cities in Orange County have a plan in place to approve condo conversions.
Compliance and Safety Inspections: The ADU must comply with the Davis-Stirling Common Interest Development Act, meet local subdivision laws, and pass a safety inspection before the condo plan is recorded.
Lienholder Consent: Consent from any lienholders on the property is required before recording the subdivision map or condominium plan.
Homeowner Associations and Utilities: Notify local utilities of the ADU's creation and separate conveyance, and form homeowners associations for managing shared spaces.
The Impact in Orange County
The housing market in Orange County could see significant changes due to this law. The flexibility to sell ADUs separately might lead to an increase in property valuations and offer new housing options in this densely populated area. However, the actual impact will depend on the decisions made by local governments within Orange County.
Advantages and Challenges
Advantages
- Increases homeownership opportunities, particularly for first-time buyers and those seeking affordable options.
- Provides homeowners with flexibility in managing their property assets.
- Contributes to solving California's housing shortage by increasing housing unit availability.
Challenges
- Homeowners need to navigate legal complexities and fluctuating market values.
- Varying construction costs and potential legal complexities in the subdivision process.
- Dependence on local government ordinances and housing market dynamics.
AB 1033 represents a significant shift in California's housing market, especially in areas like Orange County. Homeowners interested in exploring this option should stay informed about their local government's decisions and consult with real estate experts to navigate this new landscape. As the law and its implementation are still evolving, staying updated on the latest developments is crucial for anyone considering selling their ADU separately.
