Buying a Home With an Unpermitted ADU in the South Bay

by Ben Larson

(The information below is for reference only based on research and personal experience, it is NOT meant to be legal, financial, or tax advice. I can refer you to any of those professionals so feel free to reach out.)

Should you buy a South Bay home with an unpermitted ADU?

You can, but price the house as if the back unit isn't legal, and do your homework before you remove contingencies. Pull the permit history, have the unit inspected on its own, ask your lender and insurer how they will treat it, and get a written estimate to legalize it. If the unit was built before January 1, 2020, California's AB 2533 may give the owner a path to permit it, but it isn't automatic and safety fixes still apply.

By Ben Larson | November 9, 2026

You find the house. Three bedrooms up front, and out back a converted garage with a kitchenette and a bathroom that the listing calls a "guest unit" or a "bonus room." Then the question comes up that changes the whole conversation: is it permitted?

In older parts of Torrance, Redondo Beach, Lomita, and San Pedro, the honest answer is often no. Plenty of back houses and garage conversions on South Bay lots were built years ago without a final permit. That doesn't make the house a bad buy. It means you need to know exactly what you're paying for before your contingencies are gone.

Buyers are asking about this everywhere right now. A first time buyer on Reddit's r/RealEstate put it plainly: "Do you think it's okay to buy this home? Would it be a big headache later on?" A Los Angeles buyer on r/LosAngelesRealEstate asked whether an unpermitted ADU is "really a problem if I have no plans to become a landlord or Airbnb host?" Here's how I walk my buyers through it.

Price it as if the unit isn't there

The most useful rule I give buyers: an unpermitted unit is a bonus, not part of the house you're paying for. Start from what the permitted home is worth, then decide how much, if anything, the extra space is worth to you.

Three reasons:

The appraisal. Appraisers often won't count unpermitted space as living area, or they give it limited value. If the seller priced the unit like legal square footage, the appraisal can come in below your offer. My post on covering an appraisal gap explains what that can mean for your cash.
The cost to legalize. Even under the newer state rules, someone pays for plans, permit and inspection fees, and any corrections the city requires. Until a contractor walks the unit, nobody knows that number.
Resale. When you sell, the next buyer will ask the same question you're asking now. I wrote about that side of it in my post on selling a house with unpermitted work in the South Bay.

The Los Angeles buyer above was looking at a house that had been on and off the market for more than a year, with the price cut from $1.25 million to $1.05 million. An unpermitted unit can keep a house sitting, and that can give you room to negotiate if you've done the homework.

What to check during your contingency period

The standard C.A.R. purchase agreement gives you 17 days for your investigations unless you negotiate a different number. With an unpermitted unit in the picture, plan on using every one of them. Here's the order I use:

Read the disclosures closely. The Transfer Disclosure Statement asks the seller about room additions, structural changes, or other alterations made without the necessary permits. Compare those answers with the listing. Words like "bonus room," "guest suite," "flex space," or "in-law" are often a tell.
Pull the permit history. Ask the seller for permits, approved plans, and the final sign off. Torrance, Redondo Beach, and Lomita each run their own building departments, and San Pedro is part of the City of Los Angeles, so its permits go through LADBS. A permit that was issued but never finaled is not the same as an approved unit.
Compare the county records. The Los Angeles County Assessor lists recorded square footage and bedroom and bathroom counts. If what you toured is bigger than what's on record, the difference is usually the unpermitted part.
Inspect the unit like its own house. Have your inspector look hard at electrical, gas, plumbing, smoke and carbon monoxide alarms, ventilation, and exits. Then get a licensed contractor's written scope and estimate to permit it.
Call your lender early. Ideally before you write the offer. Ask whether they will lend on the property as it is, how the appraiser will treat the unit, and whether any rent from it can be used at all. Don't assume it can. Your lender is the only one who can answer those questions for your loan.
Call your insurance agent. Ask in writing how the policy will treat the unit. I explain why I want coverage lined up before you remove contingencies in my post on checking insurability before you remove contingencies.
Ask whether anyone lives there. A sale doesn't end a tenancy. If the unit is rented, get the lease, the rent history, the deposit amount, and any notices the seller gave, and talk to a landlord tenant attorney before you remove contingencies. Tenant rules in San Pedro, under the City of Los Angeles, differ from the other South Bay cities.

All of that has to fit inside your deadlines. My post on the South Bay buyer escrow timeline shows how those days usually line up.

One caution: coordinate with your agent and attorney before anyone contacts the city about this specific address during escrow. A general question about the process is fine. Opening a code enforcement issue on a house you don't own yet can affect the property and the deal.

What AB 2533 changes, and what it doesn't

AB 2533 took effect January 1, 2025. For an unpermitted ADU or junior ADU built before January 1, 2020, a city generally can't deny the permit just because the unit doesn't meet current building codes or local ADU rules. The city can still require fixes for conditions that make a building substandard under state health and safety standards. In most cases it also can't charge impact fees or utility connection charges unless an upgrade is needed for health and safety.

Here's how that looks locally:

Redondo Beach publishes an AB 2533 process. The owner applies, city staff confirm the unit existed before 2020, and a city inspector (or an optional confidential inspection by a licensed contractor) checks it against the city's substandard housing checklist. Permit and inspection fees still apply, with at least two inspections.
San Pedro falls under LADBS, which issued its own bulletin for pre-2020 units. It also offers an optional confidential third party inspection before you apply, and its inspector can ask to open up covered work to check it.
Lomita updated its ADU code in December 2024 to comply with AB 2533.
Torrance is covered by the same state law. Ask its Building and Safety division how it handles these applications before you count on a timeline.

Three details buyers miss:

The date has to be proven. Old escrow papers, dated photos, assessor records, or utility records can help show the unit existed before 2020. Ask the seller for whatever they have now, while they still have a reason to help.
It has to be a real ADU. The unit has to meet the state definition of an ADU or junior ADU. A storage room with a bed in it may not qualify.
The owner applies. During escrow, that's still the seller. You can ask the seller to start or finish the process before closing, or price the house so you can handle it after.

If you're wondering how adding permitted space could show up on a future property tax bill, that's a question for a CPA or tax professional before you close.

Your four options before you remove contingencies

Once you have the inspection, the contractor's estimate, and answers from your lender and insurer, you have four realistic choices:

Ask the seller to legalize it before closing. This is the cleanest result, but it usually means a longer escrow, because the permit has to be finaled before you close. Get the plan and the deadline in writing.
Ask for a lower price or a credit. Base it on the contractor's estimate plus a cushion for surprises. A price cut and a credit work differently with your loan, which I compare in my post on seller credits versus price cuts. Your lender has the final say on any credit.
Buy it as is. Some buyers just want an office or a place for visiting family and are fine never renting it. That can work if the inspection shows the unit is safe, but you're still taking on the resale question, and you shouldn't count on rental income from an unpermitted unit.
Walk away. If the unit has real safety problems, can't be legalized, or your lender or insurer won't work with it, cancel within your contingency period. That's what the contingency is for.

The right answer depends on what you need the unit to do. A buyer who wants a home office and a buyer counting on rent should make very different offers on the same house.

Frequently asked questions

Can I get a mortgage on a house with an unpermitted ADU?

Often, but it depends on your lender and the appraisal. Many appraisers won't count unpermitted space as living area, which can lower the value your loan is based on. Ask your lender before you write the offer and get the answer in writing.

Can the city make me remove an unpermitted ADU after I buy?

Enforcement is possible, which is why you check for open code cases before closing. For units built before January 1, 2020, AB 2533 generally gives the owner a path to permit the unit instead, with fixes required for health and safety problems. Units built later go through the regular permit process.

Can I rent out an unpermitted ADU after I buy the house?

Don't plan on it. Renting an unpermitted unit can create legal and enforcement problems and can complicate your insurance. If rental income is part of your plan, price in the cost and time to legalize first and talk to a landlord tenant attorney.

Should I ask the seller to legalize the ADU before closing?

It's worth asking, especially if the unit was built before 2020 and the city has a clear AB 2533 process. Expect a longer escrow, since the permit has to be finaled before closing. If the timing doesn't work, a lower price or a credit based on a contractor's estimate is the usual alternative.

The bottom line

An unpermitted ADU isn't a deal killer, but it's never free square footage. Price the permitted house, use your contingency period to get real answers on permits, safety, financing, and insurance, and decide before your deadline whether to legalize, negotiate, accept it as is, or walk.

If you're shopping in the South Bay, start with my free South Bay Buyer's Guide. When a house with a back unit catches your eye, send it to me and I'll help you sort out what's permitted before you write the offer. I can also refer you to a lender, an insurance agent, or a real estate attorney when you need one.

Shopping for a home with a second unit?

If a back unit is on your wish list, these are the searches I'd start with. Ask about permits on every one.

About Ben Larson

Ben Larson leads Larson Realty Group, powered by Real Broker, serving the South Bay of Los Angeles. Licensed since 2006 with more than $100 million in closed sales, he specializes in listings across the Palos Verdes Peninsula and the beach cities, and works extensively with probate, trust, and inherited property sales. Reach him at https://larsonrealty.group. DRE #01746853.