Imagine that you’ve just purchased a new home, one that includes an accessory dwelling unit (ADU). Excited about earning additional rental income, you start looking for your new tenant, when much to your surprise, you receive a notice of violation from the city telling you that your unit is actually unpermitted.
Unfortunately, you’re not alone. A recent study by Stanford used satellite imagery to determine that as many as 1,000 out of 1,300 new ADUs built in San Jose between 2016 and 2020 are illegal units! Throughout the state of California, there are tens of thousands of unpermitted units.
If you’re the owner of an unpermitted unit, you may be wondering what it will take to get your unit permitted. We’re going to answer that question today and show you what you can do to get an unpermitted unit in California legalized.
What is an Unpermitted ADU?
In the state of California, permits are required for many types of construction projects, including accessory dwelling units. Permits are required for these structures because they ensure that the unit will be in compliance with safety regulations and building codes. When an ADU or other unit is built without a permit on a property, it is considered to be an illegal ADU or an illegal unit.
Oftentimes unpermitted units are reported by neighbors who witness the construction, or even by tenants who are upset with the landlord. If your local jurisdiction discovers that an illegal unit has been built on your property, they will issue a notice of violation, requiring you to legalize the unit or face serious consequences.
Why Do Property Owners Build Units Without Permit?
While every case is different, property owners tend to build units without a permit for a variety of reasons.
- Cost Savings – Obtaining the proper permits for an addition are an expense that some owners choose to cut. Permitting costs can add up to several thousand dollars or more, depending on the size and type of unit. Many times the owners simply don’t want to pay for these permits.
- Time Savings – Not only do permits cost a significant amount, they also take time to be approved by local jurisdictions. Skipping permitting can speed up the build process by months in some cases – and as we all know, time is money.
- Lack of Knowledge – In some cases, owners are simply unaware of permitting requirements for building structures on their own property. Many times they don’t know what they don’t know.
Whatever the reasons for building without a permit, they don’t outweigh the risks.
Next, we’ll examine the potential consequences of having an illegal unit.
What are the Risks of an Unpermitted ADU?
Safety Hazards
The greatest concern with unpermitted units is the potential safety hazard they pose to occupants. In 2016, an Oakland warehouse illegally converted into housing erupted in flames, likely sparked by the unit’s makeshift electrical system. The Ghost Ship warehouse blaze ultimately claimed the lives of 36 people, making it the deadliest fire in Oakland’s history. This unfortunate incident illustrates the importance of building code compliance for the health and safety of tenants. Units that are not up to code pose a variety of dangers including electrical, structural, and fire hazards. Unpermitted units may also lack proper ventilation, emergency exits, and other life-saving elements that are required by building codes.
Fines and Penalties
If an unpermitted ADU is discovered on your property, you may be subject to substantial fines. Your jurisdiction will issue a notice of violation, in which the city will formally notify you of the unpermitted unit violation, as well as any other building code and zoning violations. The fines will vary based on the specific case, but they can be significant – much more than the cost of getting a permit in the first place.
Legal Action from Tenant
Legally, a landlord cannot charge rent to a tenant for an unpermitted unit. If a tenant discovers their unit is unpermitted, California law allows them to sue the landlord for a variety of issues including breach of contract, fraud, misrepresentation, breach of the implied warranty of habitability, and more. A tenant may even seek to recover past rent that has been paid. Because contracts for an illegal purpose (such as renting an illegal ADU) are unlawful, the landlord is not entitled to collect rent from the tenant until the unit is legalized.
Inability to Obtain Insurance
When an unpermitted unit exists on a property, owners may find it difficult to obtain homeowner’s insurance, or may face having their policies voided. Many times the owner may not have told the insurance company about the “extra unit”. Even worse, if a homeowner in a single-family home has an unpermitted/illegal unit, they may only have a homeowner’s policy and not a landlord policy, and thus no coverage.
Decreased Resale Value
If you plan on selling your property with an illegal unit or ADU, prepare to see a decrease in your property’s value. Not only that, it can also create hesitation in potential buyers because of the financial cost associated with bringing the unit up to code. If an unpermitted unit exists on the property, it is considered a “material disclosure” and must be disclosed to the buyer.
Demolition Orders
In extreme cases when a notice of violation has gone unheeded, or the building code violations are too severe for the unit to be brought up to code, a demolition order may be issued. Demolition can mean reverting a garage conversion, or a complete physical removal of a detached unit. Demolition can also mean the removal of the kitchen and bathroom, rendering the unit uninhabitable – all of which would be done at the owner’s expense. Failure to respond to a notice of violation can subject the owner to $1,000+ per day in fines that will be liened onto the property if not paid.
How Can I Know if the ADU on a Property I’ve Purchased is an Illegal ADU?
If you have or are planning to purchase a property with an ADU, how can you know if the unit is legal?
Under California Civil Code, property owners are legally required to disclose property conditions and material information to potential buyers through a Transfer Disclosure Statement (TDS). A reputable broker should reveal this information during the sales process, but it’s not a guarantee that they will. Therefore it is extremely important that you ask these questions before finalizing the purchase.
Ask your realtor to provide you with the property disclosures documents, and the agent visual inspection disclosures (AVID). Either of these documents may include information about the legal status of any ADU on the property. This is an easy miss, since it is a visual inspection of the property, and not a review of the building permit history. Simply looking at the unit, the legal status may be unknown. Sometimes County record abstracts show the wrong number of units. Ultimately, the authority with jurisdiction has the final say as to what is legal and what is not.
A Report of Residential Building Record (3R) can also provide the history of building permits for a particular lot, so you can definitively know if a unit is a permitted ADU or an unpermitted ADU. However recent changes to the cost of obtaining a 3R report have made this option unpalatable for many.
ADU specialists like Adapt Dwellings also have the ability to help you evaluate records from local building departments to uncover the legal status of an ADU. If you have concerns about the legality of an ADU on your property, Adapt Dwellings can help you get the answers you need.
What to Do if You Have an Unpermitted ADU on Your Property?
If you have been served with a notice of violation for an unpermitted unit, California requires that you take the necessary steps to legalize the unit within a reasonable amount of time.
Here are the steps needed to begin the process of legalizing an unpermitted ADU:
- Seek Professional Assistance – When attempting to legalize an unpermitted ADU, we strongly recommend seeking professional assistance. Building codes and zoning regulations are complex, and you will need a professional partner to bring your building up to code. Adapt Dwellings has extensive experience helping property owners legalize their unpermitted ADUs. Contact us to see how we can help.
- Assess the Illegal ADU – It’s likely that there will be several shortcomings in your unpermitted ADU that will need to be addressed. A professional can identify areas that may need to be improved including issues such as window height, egress and ingress, ceiling height, bathroom clearance, and more.
- Create Plans – Because the illegal ADU was never officially permitted, ADU plans will need to be created from scratch. Full drawings, including structural and energy calculations, will need to be made with the help of an architect. This will essentially treat the unit as a new building.
- Submit Plans to the City – Once plans have been created, you’ll need to submit them to the city. While many cities in California have taken steps to make legalizing unpermitted ADUs easier, your plans will still need to pass a verification process. Having professional assistance in this matter from an ADU expert like Adapt Dwellings can help speed this process up.
- Begin Construction – After plans have been approved, you can begin working with a contractor to implement the needed improvements. The more complex the changes needed, the more costly the construction will be, but it will be far less than rebuilding from scratch, and less than the potential legal and financial consequences of not legalizing your unit.
- City Inspection – A city inspector will make multiple visits to your property to inspect that different aspects of the project, including electrical systems, plumbing, foundation, entry/exit, and windows are all being prepared to meet code. Once construction is finished, a final inspection will be conducted, and upon passing, your illegal ADU will be fully permitted.
Conclusion
Having an unpermitted ADU or unit on your property poses a wide range of risks, not only for you, but for tenants as well. By taking the necessary steps to legalize your unit, you can protect your tenants from safety hazards, as well as protect yourself from fines and potential litigation.
At Adapt Dwellings, we have helped property owners throughout the Bay Area respond to notice of violation and legalize their unpermitted units. We can assist with all aspects of legalization, including assessment and planning, and help you get your unit up to code.
When you’re ready to start the process of legalizing your unit, contact the Bay Area’s ADU experts at Adapt Dwellings for a consultation.
