Change In Ownership Reassessment Appeal

Change in Ownership Property Tax Reassessment Appeals

A change in ownership property tax reassessment can substantially increase the taxable value of California real estate following a sale, transfer or change in control. However, the county assessor’s determination is not necessarily final. If the reassessed value exceeds the property’s fair market value—or the transfer was incorrectly treated as reassessable—you may have grounds to challenge the assessment and reduce your property taxes.

Property Tax Associates represents commercial and investment property owners throughout California. We review the transaction, analyze the reassessed value, prepare supporting evidence and represent you through every stage of the appeal. Moreover, we work on a contingency basis, so there are no upfront fees and you pay us only if we successfully reduce your taxes.

What Is a Change in Ownership Reassessment?

Under California’s Proposition 13, a property’s assessed value generally cannot increase by more than 2% annually. However, when a change in ownership occurs, the county assessor may establish a new base-year value based on the property’s fair market value as of the transfer date.

Consequently, a property that has been held for many years may experience a significant increase in assessed value after it is sold or transferred. The resulting increase can affect both the regular property tax bill and any supplemental tax bills issued after the transaction.

The California State Board of Equalization provides additional information about change-in-ownership reassessments and exclusions.

Transactions That May Trigger Reassessment

A reassessment can result from more than a traditional purchase and sale. For example, the following transactions may require review:

• Sale or purchase of real property
• Transfer of a partial ownership interest
• Transfer of property into or out of an LLC, partnership or corporation
• Change in control of a legal entity
• Transfer following the death of an owner
• Trust or estate distribution
• Transfer between family members
• Buyout of a co-owner’s interest
• Lease transactions that meet certain statutory requirements
• Cumulative transfers of original co-owner interests

However, not every transfer results in a complete reassessment. In some cases, only the ownership interest transferred is subject to reappraisal. Additionally, certain transactions may qualify for a statutory exclusion from reassessment.

When Can You Appeal a Change in Ownership Property Tax Reassessment?

A property owner may have grounds for an appeal when the assessor establishes an incorrect base-year value following a transfer. For instance, the assessor may rely heavily on the purchase price even though unusual financing, deferred maintenance, below-market leases or other circumstances affected the transaction.

A change in ownership property tax reassessment may also warrant review when:

• The reassessed value exceeds the property’s fair market value on the transfer date
• Only part of the property changed ownership, but the entire property was reassessed
• The assessor used inaccurate property characteristics
• The allocation between land and improvements is incorrect
• The transfer may qualify for a reassessment exclusion
• A legal-entity transfer was incorrectly classified as a change in control
• The assessor selected the wrong change-in-ownership date
• The supplemental assessment includes valuation or calculation errors
• The reassessment reflects property or improvements not included in the transaction

Nevertheless, disagreement with the resulting tax bill alone is not enough to win an appeal. The property owner must identify the valuation, ownership or assessment issue and support the requested correction with credible evidence.

How Is the New Base-Year Value Determined?

Generally, the county assessor attempts to determine the property’s fair market value as of the date ownership changed. Although the purchase price can provide evidence of value, it may not always represent the property’s full market value under California property tax standards.

For commercial and investment properties, the assessor may consider several valuation approaches. Therefore, a complete review may include:

• Comparable sales occurring near the transfer date
• Property income and operating expenses
• Market rents and vacancy rates
• Capitalization rates
• Building condition and deferred maintenance
• Lease restrictions or below-market leases
• Functional or economic obsolescence
• Development limitations
• Environmental conditions
• The terms and circumstances of the transaction

Additionally, the assessor may need to allocate value among land, buildings, fixtures and business personal property. An incorrect allocation can affect both current taxes and future assessments.

Purchase Price Does Not Always Equal Market Value

California property tax law generally presumes that the purchase price represents fair market value when property is transferred in an open-market transaction. However, that presumption can be challenged with appropriate evidence.

For example, a transaction between related parties may not reflect normal market conditions. Similarly, a purchase involving unusual financing, portfolio pricing, deferred maintenance or non-real-estate assets may require further analysis. Consequently, the assessor’s reliance on the reported sale price may produce an inaccurate taxable value.

Our Change in Ownership Property Tax Reassessment Appeal Process

Property Tax Associates handles the appeal from the initial assessment review through resolution. Because filing deadlines can be short, we recommend reviewing supplemental assessment notices and tax bills as soon as they are received.

1. Review the Transfer and Assessment

First, we examine the ownership transaction, recorded documents, purchase information and assessor notices. We also determine what portion of the property was transferred and whether an exclusion may apply.

2. Analyze the Property’s Market Value

Next, we research the property and relevant market conditions as of the transfer date. Depending on the property type, our analysis may include comparable sales, income capitalization, replacement cost and other recognized valuation methods.

3. Prepare and File the Appeal

After completing our preliminary analysis, we prepare the required appeal application and supporting valuation position. Additionally, we track the applicable filing deadlines and communicate with the county agencies handling the assessment.

You can learn more about the different matters we handle on our Types of Property Tax Appeals page.

4. Negotiate With the Assessor

In many cases, a reassessment dispute can be resolved through discussions with the assessor’s office. Therefore, we present the relevant documentation and valuation evidence in support of the requested correction.

5. Represent You at the Appeals Board

If the case cannot be resolved informally, we prepare for the Assessment Appeals Board hearing and present the evidence supporting our opinion of value. Furthermore, we respond to the assessor’s valuation arguments and advocate for the maximum supportable reduction.

The California Board of Equalization explains the general California assessment appeal process and filing requirements.

Strict Filing Deadlines May Apply

Appeal deadlines for change-in-ownership and supplemental assessments are different from the regular annual appeal period. In many situations, an appeal must be filed within 60 days of the date the county mails the supplemental assessment notice or tax bill. However, deadlines and notice procedures can vary depending on the county and type of assessment.

Therefore, you should not wait for the next annual filing period without first determining the applicable deadline. Missing the filing deadline may cause you to lose the right to challenge the newly established base-year value.

Properties We Represent

Property Tax Associates represents owners of commercial and investment real estate throughout California, including:

• Multifamily and apartment properties
• Office buildings
• Retail centers and storefront properties
• Industrial and warehouse facilities
• Hotels and hospitality properties
• Mixed-use developments
• Medical and professional buildings
• Vacant and development land
• Special-purpose properties

Because commercial properties are frequently valued through multiple approaches, these appeals often require detailed market and financial analysis. You can read more about these distinctions in our guide to Commercial vs. Residential Property Tax Appeals.

Why Choose Property Tax Associates?

Property Tax Associates has more than 18 years of experience representing California property owners. During that time, we have handled thousands of property tax appeals involving commercial, multifamily and investment real estate.

Clients choose us because we provide:

• A free initial property assessment review
• No upfront fees
• Contingency-based representation
• Detailed market and valuation analysis
• Preparation and filing of appeal documents
• Negotiation with county assessors
• Representation at Assessment Appeals Board hearings
• Continued follow-up through the final reduction

Most importantly, our goal is to reduce the burden placed on the property owner. Therefore, we manage the research, documentation, filing, negotiations and hearing preparation necessary to pursue the appeal.

You can also review examples of our work on our Actual Property Tax Appeal Results page.

Request a Free Reassessment Review

If your property received a new assessed value following a sale, transfer, inheritance or ownership change, the assessment should be reviewed promptly. Even when the transfer is reassessable, the county’s opinion of market value may be higher than the evidence supports.

A change in ownership property tax reassessment can affect your tax liability for many years. Therefore, correcting an excessive base-year value now may prevent continued overpayment in the future.

Contact Property Tax Associates today for a free property evaluation. There are no upfront fees, and you pay us only if we successfully reduce your property taxes.

Call (800) 252-3544 or request your free property tax evaluation online.