In-law apartment, ADU and illegal unit: what the words mean
People use “in-law apartment” for a second living space in a house: a finished basement with a kitchen, an attic suite, a room over the garage. The state calls a small separate home on the same lot an accessory dwelling unit, or ADU, and says it can be inside the home, attached, or detached (Mass.gov).
For a sale, what matters is whether the unit is legal. A legal unit has the right permits and has passed inspection, meets the building and health codes and is allowed by local zoning. An unpermitted unit was built or converted without them. A kitchen in the basement, with no permit, is the typical case. This is not about family. State law says ADU residents cannot be required to be related to the owner.
The 2025 state ADU law
On August 6, 2024 the governor signed the Affordable Homes Act (Chapter 150 of the Acts of 2024). Section 8 amends the Zoning Act (MGL c.40A) to allow ADUs up to 900 square feet by right in single-family zoning districts. Mass.gov says the main rules took effect February 2, 2025. The state ADU regulation, 760 CMR 71.00, took effect January 31, 2025.
- The ADU needs a separate entrance, directly outside or through a shared hall that meets the state building code for safe exit.
- It must be no larger than half the main home’s floor area or 900 square feet, whichever is smaller.
- It must meet local rules, which can include extra size limits and short-term rental restrictions.
- Towns cannot require owner occupancy or a family relationship, cannot require a special permit, cannot require any parking within half a mile of a train, subway, ferry or bus station, and cannot require more than one space elsewhere. They can still require site plan review, Title 5 septic compliance and setbacks, height and bulk rules.
The state housing agency (HLC) opened a public comment period on proposed revisions to the ADU regulations that runs through October 9, 2026, so some details may change. This law covers a unit in a single-family district. It does not automatically make an old, unpermitted unit legal, and a two-family or multi-family zone is a different situation. Ask the building department.
How an unpermitted unit can affect your sale
We found no official statewide source that says how appraisers or lenders treat unpermitted units, so the points below are general, not Massachusetts law. Ask your lender or agent.
- Appraisal. Appraisers generally count only legal, permitted living area. An unpermitted unit may add little or nothing to value, and the sale may be priced as a one-family.
- Financing. A lender may not want to lend on a house with a unit that is not legal. That can shrink your buyer pool to cash buyers and investors.
- Insurance. The state’s Division of Insurance says to tell your insurer before building an ADU, since adding one may change the risk and a policy can be non-renewed. Rented units may need landlord coverage (Division of Insurance Q&A).
- Septic. In towns with septic systems, an added unit can affect Title 5 flow limits. MassDEP guidance lists a Title 5 compliance document for ADUs, and the board of health decides property-specific questions.
- Disclosure and liability. Hiding a known problem is risky. Ask your attorney what you must tell buyers. See seller disclosure in Massachusetts.
Your three paths
1. Permit or legalize the unit
Call the building or inspectional services department in your town. Ask if the unit can be legalized and what is needed: egress, smoke and CO alarms, ceiling height, electrical, plumbing, a separate entrance and septic or sewer capacity. Some work is cheap. Some is not. Get a written scope and a contractor quote before deciding. Legalizing takes time, so it only makes sense if the sale price gain beats the cost.
2. Sell it as it is and disclose
You can sell with the unit unpermitted, usually as-is, and say so. The price should reflect it, and you will likely sell to a buyer who plans to fix or remove the unit. Your attorney should tell you what to put in writing. Read selling a house as-is in Massachusetts.
3. Decommission the unit
If legalizing is not realistic, some owners remove the kitchen and restore the space to a plain room before listing. Ask the building department what counts as removed, and keep records. Do not pay for work without a permit if one is required.
Pricing and who buys
A legal, separate unit can appeal to buyers who want rental income or space for family. An unpermitted one appeals to investors, builders and cash buyers who plan to fix it. To see how a cash offer compares to listing, use the comparison tool, and see our net proceeds calculator for what you would keep. Nearby towns such as Malden, Medford and Saugus have older houses that often have basement or attic units, so ask your agent for sales of similar houses.