ADU Separate-Sale (AB 1033): When a City Opts In, Disclosures & HOA Landmines

California’s housing rules are always shifting, and AB 1033 is one of the biggest changes to hit the ADU world. The new law gives cities and counties the option to let homeowners sell an ADU on its own, usually structured as a condo, rather than only as part of the main property.

That’s a major shift from the old rule, which flat-out banned separate sales. If your city decides to opt in, expect to navigate new layers of complexity: subdivision maps, setting up an HOA, getting lender approval, utility considerations, and plenty of disclosure requirements.

For buyers, sellers, and investors, this could open fresh paths into homeownership and add new value to properties that already have ADUs.

It’s also a perfect reminder of why continuing education matters for license renewal in California. Laws like AB 1033 are changing the landscape quickly, and agents who stay on top of them will be better prepared to guide their clients—and avoid costly mistakes.

What AB 1033 Does—in Simple Terms

AB 1033 gives cities and counties the choice—but not the obligation—to pass local rules that let a primary home and its ADU (or ADUs) be sold separately as condominiums. The state law lays out the structure, but it’s up to each community to decide whether to allow it and how the details work in practice.

One thing to note: in 2025, California reorganized its ADU laws. So instead of the old code sections you might be used to, you’ll now see these rules listed under Government Code §§ 66310–66342 in the updated materials.

When a City “Opts In”

AB 1033 isn’t a magic button that changes the rules everywhere in California. Instead, each city or county has to decide whether to pass its own ordinance allowing ADUs to be sold separately. Some move fast, others take their time, and a few may not act at all.

Take San José as an example. The city became the first in California to adopt AB 1033 in July 2024, and just a year later, in August 2025, it recorded the state’s very first ADU condo sale. That’s a big milestone but don’t assume the same opportunity exists everywhere. Before advising clients, always double-check your local code.

Agent takeaway: Confirm whether your city or county has adopted an AB 1033 ordinance, and get familiar with their specific checklist before moving forward.

How Separate Sale Works in Practice

Here’s the key: selling an ADU separately isn’t about splitting the lot. It’s about creating a condo. That means the property must be mapped under the Subdivision Map Act and set up as a condominium under the Davis-Stirling Common Interest Development Act.

The law also layers in safeguards. Before the condo plan is recorded, the ADU has to pass a safety inspection, like a certificate of occupancy or a HUD HQS inspection. On top of that, every lienholder has to sign off in writing. If a lender doesn’t agree, the deal can stall or stop altogether.

Cities often highlight these requirements with notices on their ADU checklists and permits, so homeowners know upfront what they’re signing up for. But beyond the legal boxes to check, there are ripple effects: separating title, forming an HOA, drafting CC&Rs, and possibly installing new or separate utility connections.

Agent’s role: Be proactive. Walk your clients through the potential timeline, fees for mapping, lender negotiations, HOA setup, and closing steps. The smoother you set expectations, the fewer surprises they’ll face down the road.

Disclosure Obligations for Agents & Sellers

When an ADU is sold as its own condominium unit, the transaction still triggers California’s standard disclosure requirements for residential property (one-to-four units). This includes:

• Transfer Disclosure Statement (TDS) under Civil Code §1102
• Natural Hazard Disclosure (NHD) under Civil Code §1103 and following sections

Because AB 1033 involves creating a separate condominium interest, the disclosure package usually expands to cover additional documents, such as HOA materials, CC&Rs, budgets, bylaws, rules, agreements for shared elements, easements (for 

access, parking, or utilities), the condominium map/plan, lien holder consent documentation, and any notices required by the city.

Best practice: Over-disclose. Providing buyers with a complete, well-organized packet helps answer questions before they arise, particularly around shared systems, property boundaries, and responsibilities.

HOA Landmines to Watch

Creating separate condominium interests on a single parcel brings you squarely into HOA territory. Under the Davis-Stirling Common Interest Development Act, associations can establish rules, covenants, and restrictions—and AB 1033 explicitly acknowledges this authority. In practice, common areas of conflict include parking assignments, shared walls and maintenance responsibilities, landscaping, noise, trash enclosures, insurance coverage, and use rules (short-term rentals, pets, smoking, etc.).

Agent move: Carefully review the proposed CC&Rs. Make sure you understand which areas are for exclusive use, how maintenance costs are divided, insurance responsibilities, and how disputes must be resolved. Doing this before listing or submitting an offer helps prevent surprises and ensures your clients know exactly what they are buying.

Opportunities & Risks for Buyers and Investors

Opportunities: Converting an ADU into its own condo can create a more affordable path to homeownership, giving buyers a lower entry point into the market. For sellers, it’s a way to tap into the value of an ADU without becoming a landlord.

Risks: The process comes with hurdles. Financing is still evolving as lenders adjust to “micro-condo” ADUs. Lienholder approval is required, utilities often need to be separated, and local or HOA rules can limit what’s possible. Agents need to help clients plan for HOA dues, ongoing upkeep, and how resale value may play out for these smaller condo-style homes.

Best Practices for Agents Navigating AB 1033

Track opt-in status‍

Stay on top of which cities and counties have adopted ordinances. Keep a shared tracker and link to local checklists. (For example, San José posts a detailed “ADU Condominium Conversions” guide.)

Build a deal team‍

Line up the right professionals—land-use attorney, title officer, surveyor, HOA consultant, and lenders with ADU-condo experience.

Prep sellers early‍

Set expectations upfront about timelines, lender consent, possible refinancing, utility separation, and startup costs for a new HOA.

Set buyer expectations‍

Walk buyers through shared systems, exclusive-use areas, and how HOA budgets affect monthly costs.

Document everything‍

Note shared utilities, boundaries, and open permits or variances in your AVID/TDS to avoid surprises later.

Keep learning‍

Use continuing education courses to stay sharp on condo law, disclosure rules, financing, and ethics—so you’re ready for client questions.

FAQ: AB 1033 Separate-Sale ADUs

Does AB 1033 automatically allow separate sales everywhere?‍

No. The state law gives cities and counties the option, but each local government has to adopt its own ordinance. Always check whether your city has opted in and if they’ve published a checklist before advising a client.

Do we need an HOA for a two-unit condo map?‍

Yes. Even with just two units, you’re creating a common interest development under the Davis-Stirling Act. That means governing documents, budgets, insurance allocations, and a process for resolving disputes are all part of the package.

Will the ADU get its own APN and tax bill?‍

Usually, yes. Once the condo map or plan is recorded and a unit changes hands, county assessors typically assign separate parcel numbers and issue individual tax bills. That said, practices vary—so confirm with the local assessor’s office.

Do utilities have to be separated to sell the ADU?‍

In many cases, yes. Cities and utility providers often require separate meters when an ADU is sold as its own unit. If services remain shared, the CC&Rs must clearly outline access, rights, and how costs will be split.

How are buyers financing these?‍

As condominiums. Some lenders are more comfortable than others with very small units, so it’s smart to work with loan officers who’ve already closed ADU-condo deals and understand how to account for HOA dues and reserves.

Can an existing HOA prohibit ADUs or separate ownership?‍

Potentially. Some CC&Rs already limit ADUs, parking, or separate conveyance. With new condo maps, the proposed CC&Rs will apply—so review them carefully for use restrictions and maintenance responsibilities.

Are short-term rentals allowed in ADU condos?‍

It depends. Many cities restrict short-term rentals, and HOAs often have their own rules. Always check both before promoting rental income potential.

What disclosures are required?‍

The standard residential disclosures still apply, such as the Transfer Disclosure Statement (TDS) and Natural Hazard Disclosure (NHD). On top of that, buyers must receive the full condo package: CC&Rs, bylaws, budgets, reserve studies, the condo map/plan, easements, lienholder consents, and any city-required notices.

What inspections are required?‍

Expect a safety or occupancy sign-off before the condo plan can be recorded. Some cities use a certificate of occupancy, while others set their own inspection standard.

Final Thoughts 

AB 1033 opens up real possibilities—giving buyers a new, more affordable way into homeownership and offering owners a way to cash out without becoming landlords. But with that opportunity comes added complexity: condo maps, lender sign-offs, HOA requirements, and a longer list of disclosures that change from city to city.

For agents, the takeaway is clear: stay on top of which local markets have opted in, know the disclosure package inside and out, and build a team of experts you can lean on. That’s how you’ll earn client trust and successfully guide them through these first deals.

And if you’re due to renew your California license, it’s smart to use your CE hours strategically. Dive into courses on disclosures, agency and ethics, condo law, and real estate finance—so when your market makes the switch, you’ll already be the go-to resource your clients need.