After a Los Angeles County homeowner claimed a three-year permit delay cost him more than $1 million, a California appeals court opened a new path to seek compensation. Here’s what homeowners should know.
A backyard home can mean extra rental income, a place for aging parents or room for an adult child who can’t afford to move out.
But what happens when a city takes years to approve it?
That question is at the center of a California appeals court ruling that could change the consequences for cities that unlawfully delay permits for accessory dwelling units, commonly called ADUs.
The case began in Palos Verdes Estates, where homeowner Wei Shi says he spent more than three years trying to get permission to build an ADU. He claims the delay cost him more than $1 million.
On October 23, a state appellate court ruled that homeowners like Shi may pursue financial damages when a city violates its mandatory ADU permitting duties and causes financial harm.
It doesn’t mean every delayed project qualifies for compensation. But it gives homeowners a potential legal remedy beyond simply asking a court to order a city to act.
A three-year wait and a lawsuit
Shi applied for his ADU permit in 2020, hoping to build the smaller unit alongside his family’s main home.
According to his lawsuit, Palos Verdes Estates required a conditional use permit, discretionary review and approval from the Palos Verdes Homes Association Art Jury.
Shi alleged that those additional steps delayed approval until 2023.
By then, he said, construction had become more expensive. He also claimed additional financing costs, professional fees, lost use of his property and reduced property value.
He sued the city, seeking more than $1 million.
A trial court dismissed his claim, reasoning that California’s ADU laws were meant to increase housing supply, not protect individual homeowners from financial losses.
The California Second District Court of Appeal reached a different conclusion.
In its published decision, the court explained that people applying for ADU permits are the “direct and intended beneficiaries” of the state’s mandatory approval requirements.
In plain English, California didn’t establish those rules only to encourage more housing. It also intended to protect homeowners from unnecessary permitting obstacles.
The ruling allows Shi’s lawsuit to move forward under a state law that can make public agencies liable for certain injuries caused by violations of mandatory duties.
But the court did not award Shi $1 million or decide that Palos Verdes Estates broke the law. He still must establish the necessary elements of his claim, and the city can raise applicable defenses.
The significance is that financial losses from unlawful permitting delays may now be considered in a damages lawsuit.
How long can a city take to approve an ADU?
California has spent years trying to make backyard homes easier to build, partly because they can add housing without requiring large apartment developments.
As Parriva explained in its coverage of California’s new housing laws, state lawmakers have continued changing the rules to reduce unnecessary approval obstacles. But those changes don’t eliminate local building requirements or guarantee that every project will qualify.
An ADU might be a detached backyard cottage, a converted garage or a smaller attached residence.
For qualifying applications, California generally requires cities to use ministerial approval. That means officials apply established, objective rules rather than deciding whether they personally favor the project.
Under the state’s updated 2026 requirements, several deadlines matter:
- 15 business days: A permitting agency generally must notify applicants in writing whether their application is complete. If information is missing, the agency must identify what needs to be corrected.
- 60 days: When an existing home is on the property, the agency generally must approve or deny a completed ADU application within 60 days, subject to statutory exceptions.
- Deemed approval: If the agency fails to act within the applicable deadline, a qualifying application may be deemed approved under state law.
- Appeal process: Homeowners can challenge certain incompleteness determinations or denials through a written appeal procedure.
These requirements are explained in the California Department of Housing and Community Development’s ADU Handbook.
There are exceptions. For example, if the ADU is being proposed alongside a new primary home, the timing rules work differently.
Cities also retain authority to enforce applicable building and safety codes, along with lawful objective standards involving setbacks, height and other construction requirements.
In other words, the state limits unnecessary obstacles. It doesn’t eliminate permits.
What to do if your backyard-home permit stalls
For a homeowner, a delayed permit isn’t just paperwork.
A family may be waiting for a place where a parent can live nearby. Someone counting on rental income may be paying a mortgage without the money they expected. Construction costs can climb while a project sits unfinished.
If your ADU application isn’t moving, start by documenting what happened.
Keep the dates. Save your original application, submission confirmation, correction notices and emails from the permitting department.
Ask what’s missing. If officials say your application is incomplete, request the written explanation identifying the information or documents needed.
Check the deadline. The 60-day period generally applies to a completed application, and certain circumstances can change when the agency must act.
Question additional requirements. If the city demands another hearing or approval, ask which law or objective standard requires it.
The state’s ADU resources can help homeowners understand the rules. HCD also provides assistance with questions about state ADU law.
If a delay has caused substantial financial losses, consider speaking with an attorney familiar with land-use and government liability law. Claims against public agencies can involve strict notice requirements and filing deadlines.
The new ruling doesn’t guarantee compensation. A homeowner would still need to prove an applicable legal violation, resulting harm and the connection between them.
But it adds an important consideration for cities that delay qualifying projects.
California wants more homeowners to create small housing units. This decision reinforces that the state’s permitting rules are also meant to protect the people willing to build them.
For families investing their savings in a backyard home, the difference between a timely decision and years of waiting can be enormous.
