AB 1033, Explained for California Agents: How Separate-Sale ADUs Actually Work

Assembly Bill 1033 has created a new class of real estate in California: the sellable ADU. In jurisdictions that opt in, homeowners can now convert their property into a condominium, allowing the ADU to be sold separately from the main residence. This unlocks a brand-new listing category for agents but also brings the complexities of condo law, lender sign-offs, and extensive disclosures into what would otherwise be a simple residential sale. This guide provides the essential details you'll need to navigate these transactions confidently.

What AB 1033 Actually Does (and Why It's Not a "Lot Split")

AB 1033 allows cities and counties to pass an ordinance that lets a homeowner sell their ADU separately from the primary residence. However, it's critical to understand the legal method: this is not a lot split. Instead, you are creating a common interest development—essentially, a small, two-unit condominium project.

Here’s the practical distinction:

• A lot split divides the land itself, creating two or more legally independent parcels. Each new lot is owned outright.
• An AB 1033 conversion keeps the original lot intact. The land becomes a "common area" jointly owned by the owners of the main home and the ADU with each owner holding a separate interest in their airspace unit.

This brings up a common question: "Won't the two units have different Assessor's Parcel Numbers (APNs)?"

Yes, they most likely will. Once the condominium is legally created, the county assessor will typically assign a separate APN to each unit (the main home and the ADU). However, this is done for property tax purposes only. Since the units can be owned by different people, the county needs a way to send two separate tax bills. The assignment of an APN is an administrative function for taxation and does not change the legal fact that the property is a condominium on a single, shared lot—not two separate lots.

Ultimately, the state law only provides the framework; this entire process is only possible when a local city or county officially opts in and defines the specific local rules.

Where This Is Live (and why adoption is uneven)

Because AB 1033 is opt-in, the map is patchy. San José moved first —adopting an ordinance in July 2024 and green-lighting the state’s first ADU condo sale in August 2025. That milestone proved the concept and kicked off copycat discussions in other cities. Always verify local status before you market or write offers.

The Path for Sellers: From ADU to “micro-condo”

Think of the conversion as three intertwined tracks—legal mapping, habitability sign-off, and lender consent—followed by a familiar marketing and escrow period.

1. Confirm opt-in & pull the city checklist. If your city hasn’t adopted, you’re done. If it has, the checklist will mirror state guardrails but add local steps and forms.
2. Assemble the deal team early. You’ll need a land-use or condo attorney, title, a surveyor, and someone who can draft CC&Rs that divide maintenance and spell out access, parking, utilities, noise, and exclusive-use areas.
3. Plan the disclosure stack. In addition to the standard residential TDS and NHD and other mandated disclosures, the buyer will need condo docs (CC&Rs, bylaws, operating budget/reserves), the condo map/plan, any shared-elements easements, and recorded lienholder consents (more on that below).
4. Meet the safety inspection requirement. Before the map records, AB 1033 requires proof of a safety inspection—either a certificate of occupancy issued by the local agency or a HUD Housing Quality Standards (HQS) report by a certified inspector. Build time for this into your timeline.
5. Secure lender consent (non-negotiable). The condo map cannot record without written consent from each lienholder. Lenders can refuse or require conditions (e.g., refinancing, reserve thresholds, or revised collateral language). The consent must include specific statutory language and be recorded with the county. Start these conversations early—this is where otherwise clean deals can stall.
6. Sort utilities and notify providers. Separate meters may be required by local policy or utility providers; if not, the CC&Rs must clearly allocate costs, access, and shut-off rights. Upon condo creation, the homeowner must notify utility providers of the separate conveyance.
7. Record, list, and close. Once the map and consents are recorded, market the ADU as a condo. Expect the county assessor to assign separate APNs post-conveyance (timing varies by county). Underwriting, comps, and buyer expectations look different from a standard condo—see below.

The Buyer’s Reality: Financing, monthlys, and resale

Financing. These are condominium loans, and the smaller the unit, the more attention lenders pay to project questionnaires (reserves, insurance coverage, owner-occupancy mix, litigation). Be ready to provide the new HOA budget and reserve plan. Underwriters will model HOA dues and reserves into DTI.

Monthlies. Coach buyers on the full monthly picture: mortgage + taxes + HOA dues (with reserve contributions), potential special assessments, and shared insurance mechanics (e.g., master policy + HO-6). That clarity prevents cold feet at contingency removal.

Resale. Micro-condos trade more like cottages than flats: private entries, small footprints, and the presence (or absence) of exclusive-use outdoor space, storage, and parking drive value. Your comp set will be tiny condos, cottage courts, and—ideally—local ADU-condo comps as they emerge.

Some Documents That Protect Your Client (and you)

• Statutory disclosures: TDS (Civ. Code §1102) and NHD (Civ. Code §1103 et seq.) still apply.
• Condo packet: recorded CC&Rs, bylaws, operating budget and (if available) reserve study/plan, condo map/plan, shared-elements easements, utility agreements, lienholder consents, and any city notices or checklist forms.
• AVID & over-disclosure: Map shared systems (sewer laterals, water lines, shared roofs/driveways) and note any open permits or variances. It’s hard to over-disclose on a first-generation product category.

HOA landmines (and how to avoid them)

Most post-closing drama comes from maintenance responsibility and use rules. Avoid ambiguity by:

• Drawing a maintenance matrix that names each component (roof, siding, foundation, shared driveway/gate, landscape, fences, trash enclosure, shared meters) and assigns responsibility and inspection cadence.
• Being explicit about exclusive use (patios, side yards, storage sheds) versus common area.
• Setting realistic noise and parking expectations in the rules—especially where units are close.
• Checking short-term rental rules at both city and HOA levels; do not imply rental income without verifying.

Utilities, access, and parking: the practical stuff

AB 1033 recognizes that upon separate conveyance, a local agency or utility may require a new or separate utility connection (and proportionate connection fees) where it wasn’t otherwise required for a standard, non-separately-conveyed ADU. If services remain shared, the CC&Rs need crystal-clear language on access, meter reading, maintenance, and billing. Record any access and utility easements so future owners—and lenders—aren’t guessing.

Pricing and positioning a micro-condo

Treat these like livable, detached cottages with condo paperwork. Price on privacy and function: no shared corridors, ground-level entries, outdoor space, light, and acoustic separation. Include a to-scale floor plan and a simple site plan (labeling the unit, parking, trash, and paths of travel). For buyers coming from apartment-style condos, the single-story cottage experience can command a premium per square foot despite smaller size.

Compliance notes your clients will thank you for

• Don’t oversell “automatic.” Everything depends on local opt-in and meeting statutory conditions (inspection, mapping, consents).
• Be precise about the past. Prior law had a narrow nonprofit exception; AB 1033 adds a broad condo pathway via local ordinance.

A quick case study: San José’s “first”

San José’s early adoption set the pattern: pass a clear ordinance, publish a homeowner-facing conversion guide, and coordinate internal teams (planning, building, and code enforcement). The city then approved the first recorded ADU condo in August 2025—an example that has helped normalize lender and title workflows statewide. Use that precedent when socializing the concept with your local stakeholders, but always cite your own city’s ordinance in contracts and disclosures.

What to do this week (agent checklist)

• Build a local “opt-in” tracker. Keep links to city ordinances and checklists in one doc.
• Collect a lender short-list. Identify originators who’ve already closed small-unit condos and will engage early on questionnaires and reserves.
• Template your condo packet. Create a repeatable binder: TDS/NHD + CC&Rs + budget + map/plan + easements + utility agreements + lienholder consents.
• Educate your farm. A one-page explainer for ADU owners can generate listing calls months before they’re ready to convert. Make sure to check with your broker on advertising compliance.

Bottom line: AB 1033 turns some backyards into starter homes—but only in jurisdictions that opt in, and only when you clear the condo law hurdles. The agents who win here will be the ones who master the process (mapping, inspection, lender consent), package the disclosures cleanly, and set expectations early on financing and HOA realities. Check with legal counsel and your broker to make sure you are staying compliant and you’ll be the first call when your market’s homeowners decide their ADU is ready for the big leagues.