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Policies and Procedures Regarding ADUs

For ADU Development Owners/Managers

Owners of developments containing ADUs are responsible for complying with the affordability restrictions recorded against the property. These restrictions may be specified in a Planned Unit Development (PUD) order, a Land Disposition Agreement, a Ground Lease, District financing documents, ADU Administration Plan or other controlling documents.  DHCD monitors and enforces ADU requirements and may periodically request the property owner or manager’s ADU administration plan, documentation of income certification procedures, and other program documents to ensure compliance with the controlling documents.

If required by the recorded covenant on the property, or other requirement, an owner of a rental property containing ADUs submits an annual report providing information on the households that occupy ADUs and on the size, rental rates and targeted income levels of each of the ADUs, as well as on any unit turnover that occurred during the reporting period.  Developers of for-sale ADUs may also be required to submit an annual report after the initial sales period in order to maintain a record of ADU owners. 

For ADU Renters

Prospective tenants of rental ADUs must have their income certified in order to verify that they are within the designated income limits for the property’s ADU program. The entity responsible for certifying household income varies from project to project, and can be the developer, management company, DHCD or an assignee of DHCD. Income certification includes providing relevant supporting documentation, as required by the income certification method.  Though income verification policies can vary, it is not uncommon for tenants of rental ADUs to document their income for re-certification annually. 

For ADU Owners and Prospective Owners

Prospective ADU owners may contact DHCD to learn more about the ADU, get their income certified, and discuss issues they may be having with the purchase of an ADU.  Both buyers and sellers should notify DHCD regarding unit transfer and provide DHCD with a copy of the deed and HUD-1 for DHCD’s records. 

ADU owners who wish to sell their units may refer to their covenants to understand their resale requirements.  In order to better understand these, ADU owners or their agents should start their resale process by contacting DHCD.  The sooner this process gets started, the sooner an ADU owner will understand the resale requirements and be able to properly market the ADU.  If an ADU has been listed on the open market for an extended period of time, following a typical real estate sales process, the ADU owner may contact DHCD again to understand their options going forward.

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