Should you turn your ADU into a Condo and if so, what is the process?
With San Diego County recently adopting CA AB 1033, which permits municipalities to allows ADUs to be sold separately from a primary residence, there are a lot of questions about what specifically is allowed and what the process entails. Here is a guide to help you plan your project.
CA AB 1033 is an opt in law and does not require municipalities to allow the sale of ADUs. Currently in the greater San Diego area, only the City and the County of San Diego have adopted CA AB 1033.
How many ADUs can be turned into condos and how to sell them are regulated by the State law and the local municipalities. You can’t just build an ADU, market it and sell it.
In addition to meeting all code requirements from the municipality and state, the current lender of the property need to agree to cooperate with the process.
Once you determine that you can turn your ADU(s) into a condo, what is the process and what are the costs above and beyond the planning, engineering, permit fees and construction of the ADU(s).
The first stage is having a professional surveyor map the property corners (if not already done during the construction phase), locate the improvements with respect to the property lines, drafting the Condo Map, and submission and review with the local municipality. This can cost $20k plus depending on the size and scope of the project.
A lawyer will need to draft the CCRs, the HOA documents and bylaws, and create the HOA entity. This can cost from $5k to $15K.
If utilities, the driveway or any common areas are shared, a public report may need to be created and reviewed by the DRE. This will add additional legal fees plus the DRE review fee of $1500 or $3000 depending on the type of condo map being filed.
The local municipality will charge a fee to process the Condo Map, as well can this fee can be upwards of $20K.
This process take 6 months or longer and after the Condo Map is approved, and recorded, the ADU condos have to be offered for sale first to the occupants if the ADUs are being rented and then to buyers who intend to occupy the ADUs for at least 30 days before they can be offered for sale to the general public.
Creating condos from your ADUs can be a successful investment strategy, but there are a lot of moving parts. Partnering with the right ADU company can be the difference between a successful condo project and a losing venture.
Our ADU Pros team can help you analyze the profitability of a condo conversion using our experience to analyze the costs of the projects and working with our realtor partners, we we can get estimates of the value the ADU condos add to your property.
