Understanding Prop 13 Assessment
May 31, 2009 Property Tax
The state of California has primarily two causes for assessment: transfer in ownership (also called a transfer) and new construction. A change in ownership is when a deed or deeds are recorded at the Recorder who will then send the data to the Office of the Assessor. The Assessor will review the transfer to see if its re-assessable. If it isn’tassessable then it all stops there, but if it is an assessable change in ownership, the information is sent to the appropriate personnel to give or review the value and modify the base value accordingly. A transfer that isn’t assessable must have fallen within the parameters of an exemption offered by State law. An example of this is a transfer into a revocable trust or an inter-spousal transfer that are explained in our Inherited Property and Exemptions Guide as part of the California Little Black Book.
A transfer may be exempt and the ONLY way the Assessor will not assess is if this is communicated is with forms recorded with the deed or deeds. When the change in ownership is assessable per Prop 13 no exemption is applicable or has been applied for. If you do not apply for an exemption, submit a form or offer accepted documentation for an exemption, you will be assessed. The Office of the Assessor is a mass assessment organization and if you don’t tell them through written documentation they won’t know how to process your change in ownership or know that an exemption applies.
The other cause for assessment in the state of California based on Prop 13 is construction. The Assessor is notified by the city or county building and safety departments. The city or building and safety send data about issued permits to the Office of the Assessor for assessment purposes. Remember, your city also receives some of your property taxes so even though its primarily a state tax your local municipality benefits also. So when construction permits are issued by your city or county even if you don’t end up building, which happens often, the permits are still forwarded to the Assessor. The permits are given to the real estate appraisers so that they can update the building record and change the taxable value if warranted based on Prop 13. Generally, it takes the Office of the Assessor a fair amount of time to process because field work is necessary to discover what was done to your residence and then the valuation procedure follows. If there is a demolition your property taxes will most likely be lowered and if there is an addition the taxable base value will likely go up. For example if you demo a pool your property taxes will go down. If you add a pool, your property taxes will increase. However, new construction varies from residence to residence and it will be reviewed based on the value that was added or taken away. This is detailed in the California Little Black Book with examples and various scenarios. While I worked for the Assessor I appraised countless properties where various types of construction was done and would be happy to answer any questions you may have pertaining to this!
Like new construction there will be a re-assessment of a property if the use of it changes. For example if a complex of co-ops is converted into condominiums the Assessors’s Office will reassess the value of each unit because the change affects the market value of each unit. However, generally in California there are two events that trigger re-assessment based on Prop 13: change in ownership or new construction.
About the Author: Valerie Faltas, Property Tax Expert has been involved in all facets of real estate for over ten years including assessments, appraisals, estates and trusts, investing and much more. She is a Certified Property Tax Appraiser, Licensed Residential Appraiser and a member of the International Association of Assessment Officers. As a real estate investor and advisor she is well versed in all aspects of real estate. To contact Valerie Faltas go to her website: www.propertytaxlittleblackbook.com.
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