Selling a duplex with an unpermitted unit or conversion

You can sell a duplex with an unpermitted unit or garage conversion, but you have to disclose it, and inside the City of Los Angeles you also deliver a report of the City's own records on the property. Before you list, check the permit history with LADBS, then find out whether the City's unapproved dwelling unit program or the state's rule for ADUs built before 2020 could make the unit legal, because a legal unit and an unpermitted one don't sell to the same buyers at the same price.

Do you have to disclose it?

Plan on disclosing it, because your duplex falls under the Transfer Disclosure Statement rules for property of one to four units. Civil Code section 1102.1 also states the Legislature's intent that sellers and their agents disclose any fact materially affecting the property's value and desirability, including its physical condition. A unit the City never approved can change what a lender will lend on, what a buyer can legally rent and what it would cost to legalize or remove. The same section says delivery of the Transfer Disclosure Statement can't be waived in an as-is sale, so pricing the duplex as is doesn't take the question off the table.

One newer rule reaches only a seller who bought recently. AB 968 added Civil Code section 1102.6h, in effect since July 1, 2024, for a seller of single-family residential property who accepts an offer within 18 months of taking title. That seller discloses room additions, structural modifications, other alterations and repairs a hired contractor made since taking title, with each contractor's name and contact details and copies of any permits. If you took title more than 18 months before you accept an offer, the section doesn't reach you. If you took title more recently, ask your attorney whether a rule written for single-family property reaches a duplex. How to word your disclosure of the unit is theirs to settle as well. Shaya isn't a lawyer, but he can tell you how buyers are likely to read the unit once it's disclosed, and what that does to your list of buyers.

Inside the City, the Residential Property Report you deliver under Municipal Code section 96.300 carries the City's own records on the property. Whatever it says, the buyer reads it next to your disclosure, which is one more reason to know your permit history before they do.

Check what the City approved

Start with the LADBS online building records search for your address. The City's ZIMAS map shows the parcel's zoning and its building permit history too. Then walk the lot with the records in hand and compare. Count the units the permits describe, and look for the usual gaps, such as a garage with a kitchen in it, a converted storage room, an enclosed porch or a back unit with no permit at all.

Write down what you find. If a unit was built with permits but never passed its final inspection, or was permitted as something other than a dwelling, those are different problems from a unit with no record, and LADBS is the office that can tell you which one you have. Old work by a previous owner still counts. What matters to a buyer is what the records show today.

The City's program for unapproved units

Los Angeles has a way to legalize some of these units. The City Council adopted the Unapproved Dwelling Unit ordinance on May 10, 2017, setting up a voluntary program that can bring a qualifying unit into the permitted housing stock as long as it meets life safety requirements. City Planning's quick guide sets out who qualifies.

• The lot has to be in a multifamily zone, R2 or higher, and otherwise comply with the City's code.
• You have to show the unit existed between 2010 and December 10, 2015.
• For each unit legalized, you provide at least one unit restricted to low- or moderate-income households, under a covenant that can run for up to 55 years.
• The property has to meet "good neighbor" standards, such as removing illegal signs and front-yard parking pads.

The application runs through City Planning, LADBS and LAHD in six steps, described on City Planning's unpermitted dwelling units page. Check your zone on ZIMAS first, since a lot below R2 is out before anything else is asked. The covenant is the part to think hardest about when you plan to sell. An affordable unit locked in for decades is something a buyer will price, so run the numbers both ways before you apply.

The state rule for ADUs built before 2020

State law gives a second route for a unit that can be permitted as an accessory dwelling unit. AB 2533, signed on September 28, 2024 and in effect since January 1, 2025, amended Government Code section 66332. A city may not deny a permit for an unpermitted ADU built before January 1, 2020 because it violates the building standards of the State Housing Law, or only because it doesn't meet the state's ADU rules or a local ADU ordinance. An inspector may check the unit for health and safety and make recommendations, and where it falls short, the city can't penalize you and has to approve the permits needed to fix it.

For a duplex, the question is whether your unit can be permitted as an ADU at all. HCD's ADU handbook says cities must allow ADUs on a lot with an existing multifamily dwelling, and that junior ADUs aren't allowed in a duplex, so this route is for a full ADU. How many ADUs a duplex lot can take depends on how the City applies those rules to your building. Ask LADBS what it would still require before you count on the unit becoming legal.

What a buyer's lender and appraiser may do

A financed buyer brings a lender's rules into the sale. Fannie Mae's Selling Guide will only buy a loan if what is built on the site is the optimal use of it, and the Guide counts improvements as that only when they are legally permitted, financially feasible, physically possible and more profitable than any other use. It accepts a legal nonconforming use if the appraisal reflects any harm to value and marketability. A unit built without the permits it needed was never legal, so it doesn't fit that allowance on its face.

Counting the units is its own question. Fannie Mae defines an accessory dwelling unit by reference to a primary one-unit dwelling, and it decides whether a property is one unit with an ADU or a two- to four-unit property from its characteristics, including separate meters, its own postal address and whether the unit can be legally rented. An unpermitted unit puts that last point in doubt. An owner-occupant's loan may count your tenant's rent, and whether it counts this unit's rent is for the buyer's lender to say, so ask early.

A buyer paying cash answers to no lender, but they still have to decide what the unit is worth if it can't stay. If someone lives in it, talk to a landlord-tenant attorney before you remove it, legalize it or list the duplex, because what that tenant is owed is a separate question from the permit.

Shaya can look at the duplex against its permit history with you and tell you which buyers it suits as it stands, and which ones it would suit if the unit were legalized first.