A San Diego Judge Just Cost One Investor $100K Over an ADU Conversion

A San Diego judge just cost one condo owner $100,000 over an ADU conversion. Adam Hardesty spent that money on construction and legal fees trying to convert his garage into an ADU at Mystic Point, a Carlsbad condo community. Judge Victor Torres sided with the HOA. The ruling: California's AB 670 doesn't apply to condos with multi-use zoning, only to single-family residential.

If you're an investor banking on ADU conversions in condo communities or planned developments, read this twice.

What AB 670 Actually Says

California passed AB 670 in 2019 to clear a path for ADU construction. The law prohibits HOAs from unreasonably restricting or prohibiting the construction of ADUs. It was written to stop exactly the kind of HOA blocking that killed this deal.

But there's a limit. The law applies to properties in single-family residential zones. Condos, townhomes, and planned unit developments in multi-use zoning don't get the same protection. Mystic Point's HOA used that distinction, and the court backed them.

Why This Ruling Matters

Roughly 14 million Californians live in HOAs. That's about 40% of the state. A huge portion of condos, townhomes, and planned communities sit in multi-use or PUD zoning.

If you're an investor targeting these properties for ADU value-add plays, the state law you thought was protecting you may not apply. CC&Rs and zoning win when they specifically prohibit ADUs or conversions.

The Math on What Went Wrong

Garage ADU conversions in California typically cost $70,000 to $150,000. Hardesty spent roughly $100,000 between permits, design, legal fees, and early construction work.

Without HOA approval, that investment has no exit. No rental income to service the mortgage. No resale bump from the added unit. No legal path to operate the ADU as intended. The full $100,000 becomes a sunk cost.

For an investor running multiple ADU plays across a portfolio, one ruling like this on one property wipes out the margin on several other deals.

How to Avoid This

Read the CC&Rs before you buy. Restrictive covenants can kill ADU plans even when state law seems to protect you. This is a legal document review, not a quick skim of the HOA website.

Verify the zoning classification. Is the property in a single-family residential zone? Or multi-use? Planned unit development? The answer determines which laws actually apply.

Don't assume state law trumps HOA rules. Judge Torres confirmed it doesn't, at least in condos with multi-use zoning. Until this gets appealed or new legislation clarifies it, assume the HOA has the final say in these cases.

Budget for legal risk. If your ADU play depends on an unclear zoning situation, assume you'll spend $10,000 to $50,000 in legal fees before you even break ground.

Work with a brokerage that reads zoning and CC&Rs. Most agents don't. Most investors who get burned on deals like this wish theirs did.

The Bigger Picture

ADUs are still one of the best value-add strategies in California. This ruling doesn't change that. What it changes is which properties qualify. Single-family homes are clear. Condos in multi-use zones are not.

If you're buying a single-family home for an ADU conversion, AB 670 is still on your side. If you're buying a condo or townhome for the same play, you need a zoning attorney and a full CC&R review before you write the offer.