In 2020, a California homeowner sought permission to build a second living unit on his property; he says city delays lasted over three years and cost him more than $1 million, and an appeals court has revived his lawsuit
Adding a second home on an existing residential property is often presented as one of California’s simplest answers to its housing shortage. But for one homeowner in Palos Verdes Estates, the effort to build an accessory dwelling unit became a years-long permitting battle. A recent appellate ruling has now reopened his lawsuit, finding that California’s rules were designed to protect homeowners from precisely the kind of delays he says he experienced.
A permit request that stretched for years
According to the Judicial Branch of California, Shi first applied in 2020 for permission to construct an accessory dwelling unit, or ADU, on his property in the City of Palos Verdes Estates. He planned to complete the additional dwelling alongside construction of his family home.California law requires qualifying ADU applications to be considered through a ministerial process, without discretionary review or a hearing. The Judicial Branch of California notes that the applicable rules also require a permitting agency to approve or deny a completed application within 60 days when an existing dwelling is already on the property.Shi alleged that the city did not follow that process. Instead, he said, his application was subjected to additional planning requirements, including a conditional use permit, discretionary review and approval from the Palos Verdes Homes Association Art Jury.The city ultimately approved the ADU in 2023, more than three years after Shi initially applied, according to the Judicial Branch of California.
More than $1 million in alleged losses
The prolonged approval process had financial consequences, Shi alleged. The Judicial Branch of California reports that his claimed losses included the loss of use of his property, higher construction expenses, interest costs, professional design fees and a reduction in property value. Shi estimated that his total damages exceeded $1 million.He subsequently filed a lawsuit against the city under California’s Government Claims Act, arguing that the state’s ADU laws imposed a mandatory duty on local governments and that the city’s failure to comply with that duty caused his losses.A Los Angeles County Superior Court judge initially sided with the city. The trial court concluded that the ADU laws were primarily intended to address California’s housing shortage by making it easier to create additional homes, rather than protecting individual homeowners from financial losses caused by permitting delays.
Appeals court revives the case
The California Court of Appeal, Second Appellate District, Division Four, reached a different conclusion. In its October 23, 2026 published opinion, the court reversed the lower court’s judgment, according to the Judicial Branch of California.The appellate court determined that homeowners applying for ADU permits are direct beneficiaries of the state’s requirement for timely, ministerial approval. The court reasoned that preventing unnecessary delays is central to the purpose of the permitting rules, rather than merely an incidental benefit.The ruling also distinguished between the purpose of increasing California’s housing supply and the specific duty imposed on local governments. While ADUs serve the broader goal of addressing the housing crisis, the court found that the legislation also directly benefits homeowners seeking to construct them.
What happens next
The appeals court did not determine that Shi has already proved his damages or that the city is ultimately liable. Instead, it found that he had adequately alleged a cause of action and that his lawsuit should not have been dismissed at the earlier stage.The judgment in favour of the city was therefore reversed, with the Judicial Branch of California reporting that Shi is entitled to recover his costs on appeal.The decision could have wider significance for California homeowners seeking to add ADUs, particularly where local permitting processes appear to go beyond the streamlined framework established by state law. It also underscores the growing legal importance of the state’s efforts to make accessory housing easier and faster to build.Images Courtesy: istock
