Accessory dwelling units, also referred to as ADUs and “granny flats,” have been available in California only as rentals. But a new law, Assembly Bill 1003, is giving Californians the opportunity to buy and sell them as separate properties.

ADUs come in all shapes and sizes, most as converted garages or a small home in the backyard. Under AB 1033, which was signed into law this week, property owners in participating cities will be able to construct an ADU on their land and sell it separately, following the same rules that apply to condominiums. It gives homeowners more options for building on their property, and the hope is, it would create more homeownership.

Any homeowner who plans to build and or sell a new ADU or sell an existing one must notify the local utility companies of the separate creation and conveyance of the unit. Each property will also have to form an HOA (Homeowner’s Association) to assess each property to cover the cost of caring for the property’s exterior and any shared spaces such as the driveway, pool, or common roof. Similar to condominiums, each property will have their own separate property taxes.

It is important to note that while the bill passed state-wide, under this new law, all local governments will need to opt-in to the ADU-as-Condominium for it to be an option in their cities.

Sacramento hopes this new bill will provide more affordable housing options. Investors may be the first batch of “homeowners” who test out this option. It’s too soon to tell how many will take advantage, and what the real ramifications will be, but we’ll be watching closely, and I’ll continue to share updates with you as they develop.