Can you legally rent out that garage conversion?

"ADU" covers more than the tidy backyard cottage in the renderings. In practice it means a detached unit, an attached addition, a basement apartment, or — most commonly in older Denver-metro neighborhoods — a garage that's been finished out into livable space. All of them are treated the same way by the cities that regulate them, and all of them carry the same core question before you list one for rent: is this actually a legal dwelling unit, and does the city allow you to rent it separately?

The state law changed, but it didn't remove local control

House Bill 24-1152, passed in 2024, was aimed at the owner-occupancy requirement that many Colorado cities used to attach to ADUs — the rule that said you had to live in the main house (or the ADU itself) to be allowed to have one at all. That requirement is now off the table statewide. You can build or convert an ADU and rent it out, rent the main house and keep the ADU, or rent both to separate tenants, without living on the property.

What the state law did not do is standardize size limits, bedroom counts, lot requirements, or design standards — those are still set city by city, and Westminster and Arvada differ from each other in specific ways.

Westminster's rules

• ADUs are allowed in all single-family residential zones — one per lot.
• Maximum size: 50% of the primary home's floor area, or 1,200 sq ft, whichever is smaller. Minimum size is 190 sq ft.
• Maximum two bedrooms.
• Must match the primary home's roof pitch, exterior materials, and window design.
• Not allowed on lots with duplexes, townhomes, or multifamily units — single-family lots only.
• The ADU gets its own address, but cannot be sold separately from the main home.
• Short-term rental use is still prohibited, except in a handful of Planned Unit Developments that already allowed STRs.

Arvada's rules

• Requires an existing detached single-family home already on the lot.
• Maximum size scales with lot size: roughly 600 sq ft on lots under 6,000 sq ft, up to 1,200 sq ft on lots over an acre.
• Must be configured as a studio or one-bedroom unit — no larger layouts.
• One ADU per primary dwelling; it must remain clearly subordinate to the main house.

Both cities run ADU permits through administrative review rather than a public hearing when the plans are code-compliant, but plan for the process to take real time — several months is typical once you count plan review, any revisions, and inspections, and it moves slower in busy building seasons.

The permit question is the one that actually matters

A finished garage with drywall, flooring, and a window unit is not automatically a legal dwelling. Bedrooms need a code-compliant egress window. The space needs proper electrical and, if it has a bathroom or kitchen, plumbing signed off by inspection. Depending on the city, it needs a certificate of occupancy before anyone can legally live in it.

This is the single most common problem we see with garage and basement conversions that owners inherited from a previous owner or did themselves years ago: the space has been rented for years with nobody questioning it, right up until a code complaint, an insurance claim, or a sale brings an inspector into the picture. At that point you're not dealing with an ADU question — you're dealing with an illegal-unit question, and the fixes range from expensive to impossible depending on the lot.

If you don't know whether a converted space on your property was ever permitted, that's worth confirming with the city's building department before you list it, not after a tenant is already in it.

Once it's rented, it's just a rental

A legally permitted ADU doesn't get a lighter version of Colorado landlord-tenant law. Once a tenant occupies it, you owe the same obligations you'd owe on a full house: proper tenant screening, a lease that meets Colorado's requirements, compliant handling of the security deposit, and the same warranty of habitability. Ending the tenancy, if it ever comes to that, goes through the same eviction process as any other rental — there's no shortcut because the unit is smaller or shares a lot with your own home.

If your city requires rental licensing, the ADU is a separate unit for licensing purposes in most cases — check our city-by-city rental licensing guide before you sign a lease, not after.

Practical steps

1. Confirm permit status first. Pull permit history from the city before assuming a finished space is legal, whether you built it or inherited it.
2. Check current zoning against the specific rules above — lot type, size, bedroom count — since a plan that worked five years ago may not match today's code.
3. Budget real time for permitting if the space needs to be brought up to code or newly permitted, especially heading into the slower winter construction months.
4. Treat it as a separate rental unit for screening, the lease, the deposit, and licensing — not an informal arrangement because it's on the same lot as your home.
5. Get a straight answer on rent. A studio ADU and a three-bedroom house don't rent the same way, and pricing it like a spare room instead of a real unit leaves money on the table.

Where this fits

ADU rules sit alongside — not instead of — everything else that governs a rental in Colorado. If the property is in an HOA, check what the covenants allow separately from city zoning. And if you're weighing whether a permitted ADU is worth the investment versus simply renting the main house, that's exactly the kind of call a rental pricing analysis can settle with real numbers instead of guesswork.