Renting an unpermitted Accessory Dwelling Unit (ADU) may seem like a simple way to earn extra income, but it comes with serious legal and financial consequences. California law has strict guidelines for ADU construction and rental compliance, and failure to follow these regulations can lead to significant risks.

Here are the three biggest pitfalls of renting an unpermitted ADU:

1. Tenant Lawsuits

One of the most alarming risks is that tenants could turn the tables and sue you for all the rent they’ve paid while living in an unpermitted unit. Since the agreement may be deemed unlawful, tenants can demand reimbursement for any payments made during their tenancy.

Landlords renting unpermitted units often lose these cases, resulting in substantial financial losses. Beyond legal fees, you could be forced to repay thousands of dollars in rent to your tenants.

2. Evictions and Relocation Assistance

If the city discovers your unpermitted ADU, they may require you to evict the tenant. However, evicting a tenant from an illegal dwelling isn’t always straightforward. California’s tenant protection laws often mandate landlords to provide relocation assistance, which can cost up to $25,000, depending on the circumstances.

Additionally, the eviction process may expose you to further legal scrutiny, creating more complications and costs for property owners.

3. Costly Property Repairs and Restorations

Finally, the city could order you to restore the property to its original condition. This often requires:

• Demolition of the unpermitted ADU
• Rebuilding to comply with zoning and building codes
• Addressing additional safety concerns like fire hazards or inadequate utilities

These expenses can quickly become a financial burden, especially if fines or penalties are added on top of the restoration costs.

How to Avoid These Risks

To steer clear of these costly consequences, here’s what you can do:

1. Obtain Proper Permits: Ensure your ADU complies with local building codes before renting it out.
2. Work with Professionals: Hire licensed contractors and consult a legal expert to navigate zoning and permit requirements.
3. Perform Regular Inspections: Proactively address safety and compliance issues to protect your investment and your tenants.

Conclusion

While renting an unpermitted ADU might seem like a quick way to generate income, the risks far outweigh the benefits. Between lawsuits, costly tenant evictions, and expensive property restorations, non-compliance can jeopardize both your finances and your reputation as a property owner.

To dive deeper into the legal risks, check out this detailed guide from SNS Law Group, which served as the basis for this information.

If you’re considering building or legalizing an ADU, it’s essential to do it right the first time. Reach out to professionals like SKS Construction for expert guidance on compliance, permitting, and construction.