All Forum Posts by: John Trefry

Excellent thread, thanks to all for the insightful contributions.

I wanted to share a novel approach to bypass the Owner-Occupancy requirements for JADUs put forward by a San Diego-based company called SnapADU. This snippet is from their article here.

If an investor-owner is a legal entity (LLC, S-Corp) does that preclude the investor from having a junior accessory dwelling unit (JADU)?

This is also where we get into more complex questions regarding the definition of “owner occupied.”

What defines Owner-Occupied?

The California laws related to ADUs do not provide a definition for the term "owner-occupied." The term "owner-occupied" is a term that generally was created for the IRS and tax purposes, though cities also typically follow this term of art. Conversely, legally a business (LLC/S-Corp) is a non-living legal entity.

What are the definitions that pertain to LLCs and S-Corps?

In order for a property to be owner-occupied, a living person owner must move into the residence within 60 days of closing and live there for at least one year. For the homes where an ADU will be added, the owner must live at the residence for the majority of the year (typically defined as spending at least 70% of the time living at the homes).

A business (LLC/S-Corp) is a non-living legal entity. A business does not occupy anything. It only exists on a piece of paper. As such, a LLC or S-Corp will likely not qualify as an “owner-occupant” and a JADU most likely wouldn’t be allowed, even if the LLC or S-Corp is a single member company.

Nevertheless, the LLC or S-Corp can buy and hold real estate (learn more about how to set up an LLC for investments). And as far as the IRS is concerned, the single member LLC/S-Corp will be treated the same as a single person living in their home. So, a single person LLC/S-Corp wouldn’t receive the benefit of renting to themselves.

Does an owner-occupant have to be a real person to have a JADU?

"Owner-occupied" most likely will be required to be a "person," which by legal definition is a living being. An LLC or S-Corp is not a living being. Thus, a LLC or S-Corp will likely not succeed in applying for a ADU + JADU. Nevertheless, because the term isn't specifically defined in the municipal codes, it could be worth investigating if a city would deviate from this understanding of “owner-occupied” and apply it to single member LLCs and S-Corps where the sole member/shareholder is the primary resident of the primary dwelling unit.

Any thoughts on whether this approach holds water?

Very curious to hear from any owners of JADUs who have moved out of their properties

Hi forum,

We are working on our 2nd SFR and planning to build a detached ADU and attached JADU. We are circling a number of properties and want to find the right partner before we close.

We have a bit of a unique situation and would love input from the BP community.

My wife is an architect (formerly at Gensler) and is providing all of the design and elevations + floor plans.

We are researching feasibility consultants and structural engineers in the LA area who specialize in ADUs and would love any vetted recommendations. We've done a deep dive on the design/build firms in the area and feel that they are charging a premium for what they provide.

We're looking for vendors who are collaborative especially since we will be providing the plans.

Any suggestions are greatly appreciated!