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#80 New CA Law Lets You Legalize That Illegal Unit (AB 2533 Explained) · Own More Doors

• 0:00
  SPEAKER_00: So you're an apartment owner and one of your units is illegal.
• 0:03
  SPEAKER_00: It's non-permitted.
• 0:04
  SPEAKER_00: It's non-conforming.
• 0:05
  SPEAKER_00: Call it what you will.
• 0:05
  SPEAKER_00: It's not a permitted unit.
• 0:07
  SPEAKER_00: Tune into today's show because we're going to show you how this exciting new state law is going to allow you and give you a way to legalize that unit.
• 0:14
  SPEAKER_00: Hi, I'm Juan Weezar.
• 0:15
  SPEAKER_00: And I'm Cody Charnell.
• 0:16
  SPEAKER_00: And we're going to go right into this.
• 0:19
  SPEAKER_01: So the law that Juan is talking about, it's a statewide law called AB 2533.
• 0:25
  SPEAKER_01: And what it allows is legalization of unpermitted ADUs.
• 0:30
  SPEAKER_01: So, you know, in Long Beach, there's a lot of old apartment buildings that have been chopped up, divided, and we see unpermitted units all the time.
• 0:38
  SPEAKER_01: What's tough about those is you can't count the income when you're going to qualify for a loan.
• 0:44
  SPEAKER_01: If the units are lacking on health and safety features, you can be at a big risk liability-wise if a tenant gets injured or something else happens.
• 0:56
  SPEAKER_01: So this new law creates a pathway for you to legalize that space, which in turn increases the value of your property.
• 1:05
  SPEAKER_01: So there's a few specifics that you need to know.
• 1:08
  SPEAKER_01: Number one, the unit has to have been in service before January 1st, 2020.
• 1:14
  SPEAKER_01: So the city is going to ask you to see old lease documents, old utility bills, potentially old appraisals.
• 1:20
  SPEAKER_01: They want to see beyond a reasonable doubt that that unit was existing and you're not just adding one now so that you can go through this process, right?
• 1:28
  SPEAKER_01: It's for existing uh unpermitted units.
• 1:32
  SPEAKER_01: They also are not making you do quite as much as you would with a new ADU.
• 1:38
  SPEAKER_01: So you don't have to meet like energy efficiency standards, you don't have to um go through the same process or pay the same fees as a typical ADU.
• 1:47
  SPEAKER_01: So it's a streamlined, easier process.
• 1:49
  SPEAKER_01: They just want to make sure it's it's uh safe, habitable, um, and you know makes it a lot easier for you if you're wanting to legalize a unit.
• 1:59
  SPEAKER_00: Cody, when they legalize it, are they calling it an ADU?
• 2:03
  SPEAKER_01: Okay, they are calling it A.
• 2:05
  SPEAKER_01: So I don't have any clients who've completed the process at this point, but I have several who are in the process.
• 2:11
  SPEAKER_01: So what I can say is um you can have an independent inspector come out and inspect your unit, tell you what you need to do to meet the health and safety requirements that the city is going to look for.
• 2:23
  SPEAKER_01: Cities are supposed to have published a checklist on their website showing what items need to be or what points need to be met before the unit can be legalized.
• 2:32
  SPEAKER_01: So with City of Long Beach, there is a checklist published.
• 2:35
  SPEAKER_01: So you go through that list, you gather your documents showing that the unit was existing prior to January 1st, 2020.
• 2:43
  SPEAKER_01: Um, you also have to have plans drawn up for the building.
• 2:48
  SPEAKER_01: Um, it's not like a full set of plans like you would need for an ADU.
• 2:53
  SPEAKER_01: It's a more simplified version.
• 2:55
  SPEAKER_01: And then you submit all of that to the city.
• 2:57
  SPEAKER_01: City does their review, they come out and look at it and tell you if any corrections are needed.
• 3:01
  SPEAKER_01: And, you know, at that point you should get your certificate of occupancy.
• 3:05
  SPEAKER_01: So we have some clients who are, you know, at various stages within that, but it seems as though it's a pretty simple process.
• 3:12
  SPEAKER_00: Reach out to us if you want to be connected with a property inspector that that could give you that first initial inspection.
• 3:18
  SPEAKER_00: Um, I will tell you this: if you're an owner right now and you're thinking about selling and you have an unpermitted unit or a non-conforming unit or a grandfather, call it all these things that people call them, it's unpermitted.
• 3:30
  SPEAKER_00: We would highly recommend that you go through the process.
• 3:33
  SPEAKER_00: This is not gonna be like, well, I don't want to raise my hand because they're gonna slap my hand at the city for not having the permits.
• 3:38
  SPEAKER_00: If, like Cody said, it's been in service for several years, six years, um, then there is a path.
• 3:45
  SPEAKER_00: And we will tell you this, from a pricing perspective, it's gonna help us tremendously.
• 3:50
  SPEAKER_00: From a financing perspective, it's gonna help us tremendously because right now, um, although you're receiving income from that illegal unit, when we go to the bank for the new buyer who wants to buy it from you, they will not count that income, which then impacts the financing.
• 4:06
  SPEAKER_00: So um again, the cost is less, it's more of a stream streamlined process.
• 4:10
  SPEAKER_00: And now I know right now we've only been talking about Long Beach because that's where we our service area is, but this is a statewide law.
• 4:17
  SPEAKER_00: So no matter where you're at, the your city is gonna have some type of checklist to how to go about getting your unit permitted.
• 4:25
  SPEAKER_00: There's um, from my perspective, if you're in that situation, there's nothing bad that could come of this.
• 4:31
  SPEAKER_00: Um, I don't believe they're gonna make you tear it down unless something is like uninhabitable, that might be an issue.
• 4:36
  SPEAKER_00: But for the most part, they probably want it to be like, hey, it's not gonna burn down.
• 4:40
  SPEAKER_00: The electrical was done right.
• 4:41
  SPEAKER_00: It's, you know, it's someone could live in it and it's not gonna be a liability to the city or to you.
• 4:46
  SPEAKER_00: So to me, it's like a really good idea to just go forward.
• 4:49
  SPEAKER_00: Now, I will tell you this several years ago, the city of Long Beach passed its amnesty program.
• 4:55
  SPEAKER_00: And it was a launch, but then it was a failed launch because they they rolled it out.
• 5:00
  SPEAKER_00: And I was even invited to be on these um panels to be one of these early adopters because they knew that I service the apartment world and they're like, this is a great program.
• 5:11
  SPEAKER_00: And all of a sudden, someone pulled the plug on it and it went nowhere.
• 5:14
  SPEAKER_00: And so, what's good now is that this is not a city of Long Beach Amnesty.
• 5:19
  SPEAKER_00: This is statewide.
• 5:20
  SPEAKER_00: And so uh highly recommend that you reach out.
• 5:23
  SPEAKER_00: If you're someone who's thinking about selling, have Cody and I come out to your property, let us take a look at that unit, and we could assist.
• 5:30
  SPEAKER_00: Put you in the contact with uh with the contractors, with the inspectors to get that property uh through the point of having it completed.
• 5:38
  SPEAKER_00: A large percentage of our listings have unpermitted units.
• 5:41
  SPEAKER_00: And we go ahead and sell them, but we always tell the sellers, look, it's gonna impact the value.
• 5:45
  SPEAKER_00: It you're gonna get some credit, but not full credit.
• 5:48
  SPEAKER_00: And if you're in your shoe, if you're an owner, you want full credit.
• 5:51
  SPEAKER_00: And quite frankly, the buyer wants you to do it because the buyer wants that income and they don't want to deal with that issue.
• 5:57
  SPEAKER_00: So, all in all, I think it's a good program.
• 5:59
  SPEAKER_00: Uh, you might be wondering why the city would even pass this or the state would pass this.
• 6:03
  SPEAKER_00: And what the state is trying to do is legalize more units for the requirement of creating more housing.
• 6:08
  SPEAKER_00: So there you have it.
• 6:10
  SPEAKER_00: Make sure to reach out, comment, like, subscribe until next time.