If you’re seeking extra space or additional rental income, an Accessory Dwelling Unit (ADU) can be a great addition to your property. However, like many homeowners today, you may be wondering whether ADUs can be sold separately from the main house. Unfortunately, the answer isn’t straightforward.
In this guide, we’ll explore the legal, logistical, and practical considerations behind selling an ADU independently and provide insights for homeowners interested in this possibility.
Can ADUs Be Sold Separately from the Main House?
Not too long ago, I worked with a couple who had recently built an Accessory Dwelling Unit (ADU) in their backyard. After a few months of renting it out successfully, they started exploring the idea of selling the ADU separately to free up some funds for a retirement investment. They loved the idea of this added flexibility, but naturally, they had questions about the process.
One of their first questions was, “Can ADUs be sold separately from the main house?” It’s a question I hear more frequently these days. Unfortunately, in most cases, the answer is no.
ADUs are legally classified as secondary units that are part of the same parcel of land as the primary residence. Unlike traditional homes or multifamily properties, ADUs don’t have their own distinct lot—they share the same legal address and property boundaries as the main house.
As a result, they can’t be treated as a separate property for sale. For an ADU to be sold independently, the property would need to be divided into two legal lots, a process known as subdivision.
Understanding Zoning Laws and Property Subdivision
Local zoning laws and property subdivision regulations play a major role in whether or not you can sell an ADU independently. In most residential areas, zoning ordinances are designed to maintain a certain housing density, which prevents homeowners from splitting their lots and selling ADUs separately.
To sell an ADU as its own unit, the property would need to be subdivided, meaning it would have to meet specific criteria for lot size, utility connections, and housing codes.
The Subdivision Process: A Legal and Logistical Challenge
Subdividing a property is the process of dividing a single parcel of land into two or more separate parcels, each with its own legal title. In theory, this would allow the ADU to be sold independently from the main house, as it would then occupy its own parcel of land. However, subdividing a property is highly regulated and can be complex, lengthy, and costly.
To subdivide a property, you must typically meet several legal requirements, which can vary depending on the local jurisdiction. These requirements often include:
- Lot Size Compliance: Many areas have minimum lot size requirements that must be met for a property to be subdivided. If the existing lot is too small, the subdivision may not be permitted. For example, if a city requires each lot to be at least 5,000 square feet and your property is only 7,500 square feet, subdivision may not be possible.
- Utility and Infrastructure Adjustments: Each new lot must have independent utility access, including water, electricity, gas, and sewage. This often involves reworking existing utility connections, which can be both expensive and technically challenging, especially if the ADU currently shares utilities with the main house.
- Access and Parking: Each newly created lot must have independent access, such as driveways or walkways, along with sufficient parking. Many neighborhoods have strict rules about parking spaces per unit, and adding new access points can be challenging if the property does not have sufficient room.
- Conformity to Local Plans: Beyond zoning and building codes, subdivisions must also align with the city’s development plans. This means that subdividing a property must align with the city’s long-term goals for housing density, land use, and neighborhood character.
- Approval from Local Authorities: Subdivision is not simply a matter of filing paperwork. You must seek approval from local planning departments, which can involve public hearings, environmental impact studies, and reviews by various city officials. This approval process can take months or even years, and there’s no guarantee that the request will be granted.
Are There Exceptions for Selling ADUs Separately?
Most local zoning laws don’t allow homeowners to sell an ADU separately from the main house, but a few exceptions and creative legal options exist. Although rare, these exceptions usually require complex legal steps or apply in specific areas. Let’s look at some of these possible exceptions:
1. Condominium Conversion
One possible way to sell an ADU separately is by converting the property into condominiums. This involves legally dividing the main home and ADU into two separate condo units, allowing each to be sold to different buyers. However, condo conversions are complex and highly regulated, requiring approval from local planning authorities.
Typically, these authorities enforce strict rules, including meeting building and safety codes, ensuring separate utility connections (like electricity, water, and gas), private entryways, fire safety compliance, etc. Additionally, the property must pass inspections, and extensive legal documentation is needed to establish each unit’s independence.
Condo conversions are more common in urban areas with higher demand for multifamily housing, where cities may be more open to increased housing density. While this route can allow you to sell your ADU separately, it demands significant time, investment, and professional expertise.
2. Regional Laws and Pilot Programs
Some regions have begun exploring new policies to address housing shortages, including experimenting with ADU regulations. In areas with a high demand for affordable housing, some municipalities may allow ADU sales under specific conditions. These pilot programs or regional exceptions give ADU owners a potential pathway to sell their units separately, though they are often limited in scope.
For example, in parts of California, Oregon, and Washington, local governments are reexamining zoning laws to meet increasing housing needs. Some cities are considering options like allowing ADUs to be built on smaller lots or loosening restrictions on ADU ownership. These forward-thinking policies could eventually make it possible for homeowners to sell their ADUs independently of the main house.
3. Lot Splitting in Certain Jurisdictions
In some rare instances, local zoning laws may permit lot splitting, which allows you to divide your property into two separate parcels—one for the main residence and one for the ADU. With this split, each parcel becomes its own legal entity, allowing the ADU to be sold separately from the main house.
However, most jurisdictions have strict requirements for lot size, setbacks, and infrastructure that make lot splitting difficult. Typically, it involves obtaining planning approvals, meeting detailed zoning criteria, and paying considerable fees.
The new lots must also have separate utilities, direct access to public roads, and comply with local building codes. Even where allowed, these requirements make lot splitting difficult and costly.
That said, recent housing legislation in states like California has made it easier for property owners to subdivide large lots to accommodate new housing units. While aimed at promoting new construction, these laws may provide a legal way to sell an ADU separately in certain situations.
4. Legal Entity Structures (e.g., Tenancy-in-Common)
Another creative, though less common, approach is the use of legal entity structures such as a Tenancy-in-Common (TIC) arrangement. In a TIC, multiple owners share ownership of a property, but each owner has exclusive rights to use specific parts of it. This means that one party could own the primary residence while another could own the ADU.
Though this doesn’t technically make the ADU an independent property, it provides both parties with a form of separate ownership and control over their sections of the property.
TIC agreements are more common in areas like San Francisco, where housing is scarce, and homeowners seek alternative ownership structures to manage shared spaces. While this approach requires a solid legal framework and clear agreements between owners, it can effectively create separation between the main house and the ADU.
FAQs
1. What are the insurance requirements for an ADU?
Insurance needs for an ADU can vary, but typically, your homeowner’s insurance can be extended to cover an ADU. Some policies may require additional coverage if you intend to rent the ADU.
2. Do ADUs need separate utility meters from the main house?
It’s not always necessary, but separate meters can make it easier to track utility usage, especially if you’re renting out the ADU. Some local codes may require separate meters, so check with your local building authority.
3. Are there tax implications for owning an ADU?
Owning an ADU can affect your property taxes, as the value of your home may increase. It’s a good idea to consult with a tax advisor for specific advice.
Conclusion
While the idea of selling an ADU separately from the main house may seem appealing, the legal, zoning, and financial barriers make it a challenging and often impractical option. Local regulations, subdivision requirements, and buyer financing issues all play significant roles in preventing ADUs from being sold independently.
If you’re interested in adding value to your property through an ADU or exploring your selling options, we at GoldenADU are here to guide you. Schedule a free consultation with us at 213-693-2405 and learn how to maximize your ADU’s potential!
