Assembly Bill 1033 (“AB1033”) authorizes city agencies within California to allow for the individual sale of ADUs separately from the primary residence (house). This essentially can turn ADUs into sellable condos or as we like to call them, Accessory Condo Units (“ACUs”). California cities do not have to adopt this policy but can do so at their discretion and draft local legislation for the bill’s implementation.
At the time of this response, Accessory Condo Co. only has confirmation that San Jose, CA will be implementing AB1033. We have heard of other cities beginning to assess adoption but are not aware of any definitive plans. However, with the successes seen across the state with ADU policy, we have reason to believe many other cities will be implementing this measure in the near future. The best way to confirm your city’s status will be reaching out to your local Planning Department.
Accessory Condo Co. partners directly with homeowners to fund and coordinate the development of accessory condo units. We cover all expenses associated with the development and manage all of the work associated with the build. Once completed, you can either buy us out of our ownership stake at a pre-agreed upon price that is discounted to fair market value, or we can sell the unit to a new homeowner and split the profits with you at a pre-agreed upon profit sharing split.
By building a new condo on your property, we have created an asset worth hundreds of thousands of dollars that also has the potential to be rented, in turn generating tens of thousands of dollars annually. The new ACU is a completely separate asset from your existing house and is able to be financed and / or sold independently.
Our network of lenders recognize this value and are willing to provide a new, distinct loan solely for this unit. Accessory Condo Co. can provide the necessary introductions to help you secure this new loan by using the potential rental revenue from the new ACU to fully cover the monthly mortgage payments while also providing you with additional free cash flow every month. Further, because Accessory Condo Co. can sell back their ownership in the ACU to you at a discounted value relative to market price, you will have instant equity in the unit increasing the total value of your property.
In the event you want to keep the ACU and need help covering the down payment associated with buying back your new unit, Accessory Condo Co. can pay you the down payment amount up front when we enter into our partnership agreement as a form of compensation for allowing us the opportunity to build and sell a unit in your backyard. We will then simply add this amount back to the final sale price to ensure our cost basis is covered. You now have a brand new unit with no out of pocket costs!
Technically speaking, the answer is, no! Keep in mind, the newly built unit is a condo. Condos only “own” from the walls inward. Condos in turn “rent the land” from the Homeowners Association or “HOA”. Accessory Condo Co. aims to structure the HOA in a manner that allows the owner of the primary residence or “main house” to retain ownership of the land that all of the housing units are built on. This is very similar to a standard ground-lease in which tenants rent land from an owner and are allowed per the lease to make capital improvements on the site that they are renting. In this case, you as the homeowner are for all intents and purposes, “leasing” the land to the new buyer that is utilizing the ACU as a capital improvement. As an aside, this does present a possibility of generating additional income from the new unit via HOA fees, but the feasibility of this depends on a variety of factors that Accessory Condo Co. can discuss with you directly.
So while you would be forfeiting the space in your backyard that the new unit is built on, you would be retaining the ownership of the land underneath it. That said, the new unit will likely have a designated backyard space / outdoor area for privacy purposes, but that privacy gets reciprocated to you since the remaining areas will be for your private enjoyment.
In the case that you buy us out of the unit upon completion, you would still own all of the land, except now there is just a condo unit residing on it.
Overall your property and your daily life should be minimally impacted by this process. The new ACU will have a completely separate entrance with a designated access path designed to be minimally invasive. Depending on your city’s local legislation and treatment of AB1033, off-street parking may be required, but if optional, this will be left entirely to your discretion as the homeowner.
Yes! We pride ourselves in collaborating with homeowners and work our hardest to ensure the end product is something you will be happy with. We provide the general guidelines based on our investment analysis (size range of new unit, bedroom / bathroom count, standard designs / materials that fit within our budget constraints) and work with you to tailor the build to your choosing within this framework.
Yes. Accessory Condo Co. will help you obtain written approval from your lender to grant a partial lien release. Most lenders are typically ok with our AB1033 partnership program as you still own the land even after the ACU is sold as outlined in the HOA. You are simply “leasing” the land to the new condo unit. This means the property the lender currently has a lien on is overall increasing in value as the new unit is a capital improvement, in turn making the lender’s position more secure.
In the event your lender does not approve our AB1033 partnership program, a partial lien release can typically be granted if the re-assessed value of your home still satisfies a lender’s loan-to-value requirements. In some cases, your lender may require that some of your sale proceeds got towards paying down your existing mortgage.
In the event that you buy back your unit buy purchasing Accessory Condo Co.’s ownership stake, you will remain the owner the entire time and as such, lenders are typically ok with such an arrangement.
The impact of a new unit development on your current home’s value will vary depending on if you sell the unit or if you buy out Accessory Condo Co. and keep the new ACU.
If you sell the unit to a new tenant the future re-sale value of your home will likely decrease ~5% to 10%, but the profits you make from doing this will far outweigh any loss in value. Moreover, this process largely does not impact the potential rental value of your home, so you could always decide to keep your home and rent it out with minimal to no net loss in the event you are considering moving out.
If you decide to buy the newly built unit, the total resale value of your property will likely realize an increase by approximately the fair market value of your new condo unit. This is because you could theoretically sell the unit off separately or sell both your home and the ACU to a new owner that can utilize the property as a large compound or sell one of the units while residing in the other. The flexibility creates a significant increase in value.
No! We partner with homeowners directly via a joint venture. As such, all development funds are in the form of an equity investment that is secured by the new unit’s as-completed value. We do not take a 2nd position loan / lien on your existing home, and you are not personally liable for repayment of funds. We simply have an agreement granting us an ownership interest in the value of the new unit.
Please note that each city may adopt a different stance on how AB1033 taxes are treated but at this time it is believed that each unit will be taxed as standard condominium units. This means new owners of an ACU will pay their portion of taxes via HOA. In the event you decide to buy your new unit, it is possible that you will realize a tax efficiency as you would be “buying” your unit at a discounted rate relative to market value. Furthermore, it may be the case that the AB1033 process itself does not trigger tax reassessment. This would mean that buying a unit from yourself may not cause re-assessment in turn resulting in the treatment of your ACU being similar to that of an ADU, which is simply your tax rate multiplied by the declared build value.
Ultimately Accessory Condo Co. will assess these implications for each city based on their local legislation on your behalf before entering into a partnership agreement.
There is no fee, no risk, no obligation, and no credit check to join our waitlist and reserve your ACU funding with Accessory Condo Co.
Before officially partnering together, Accessory Condo Co. will perform any necessary underwriting and will let you know directly if a credit check or background check is required.
AB1033 passed in October of 2023 and went into effect at the state level in January of 2024. Before this, selling ADUs was not easily accessible to the average homeowner. While there may be smaller operations already prepping to capitalize on the bill’s adoption, we’re proud to be the first company offering homeowners a solution to realize the power of AB1033 and unlock the full potential of their properties!
Yes! The first step to working with us is to reserve your funding by joining our waiting list. Once we have your information, we will schedule a call with you directly to answer any questions you have and discuss the feasibility of working together. After this initial conversation we will create a personal proposal for your home and schedule a final consultation that reviews our proposed build, partnership agreement documents, and financial analysis. At that point you can determine if you would like to move forward in partnering with us!
While our goal is to help as many homeowners as possible, our funding is limited and available on a first-come, first-served basis. If you are in an AB1033 approved city and reserve your funding through our waitlist, we will contact you in the order your submission was received. If funds are still available when we contact you, we will hold your spot until after our final consultation to ensure you can make an informed decision that is best for you.
If your city has not approved AB1033 yet but you would like to join our waitlist, you may still do so. We will continue to prioritize submissions in the order they are received. Joining our waitlist ahead of your city’s scheduled adoption of AB1033 is a great way to increase your probability of receiving funding for your project once your city does eventually opt into the program!
If funding is currently not available you may still join our waitlist as well. We are committed to funding more projects as soon as feasible and will reach out to your submission as soon as we can!