Overview
The California Constitution requires the reappraisal of property in the event of a change of ownership. Under Proposition 13, the full cash value of property that changed ownership after the 1975 lien date is its current value as of the date the change in ownership occurred. [Cal. Constitution Art. XIIIA §2(a) .]
What is a change of ownership?
A “change of ownership” means the transfer of interest in real property, including the beneficial use thereof, the value of which is substantially equal to the value of the fee interest. [Cal. Rev. & Tax. Cd. §60 ; Cal. Code Regs. 18 §462.001 .] A change in the name of an owner of property that does not involve a change in the right to beneficial use is not a change of ownership for reassessment purposes. [Cal. Code Regs. 18 §462.001 .]
Change of ownership inclusions.
Change in ownership includes, but is not limited to:
(1) Oil and gas leases—The creation, renewal, sublease, assignment or other transfer of the right to produce or extract oil, gas and other minerals is a change of ownership, regardless of period during which the right may be exercised; the balance of property will not be reappraised. [Cal. Rev. & Tax. Cd. §61(a) .]
(2) Possessory interest in exempt property—The creation, renewal, extension, or assignment of a taxable possessory interest in tax exempt real property for any term is a change of ownership. Assignment of a possessory interest means the transfer of all rights held by the transferor. “Renewal” and “extension” do not include the granting of an option to renew or extend an existing agreement pursuant to which the term of possession of the existing agreement would, upon exercise of the option, be lengthened, whether the option is granted in the original agreement, or later. [Cal. Rev. & Tax. Cd. §61(b) ; Cal. Code Regs. 18 §462.080 .] The renewal or extension of a possessory interest will not be reassessed as a change of ownership until the end of the reasonably anticipated term of possession. At the end of the reasonably anticipated term of possession, a new base year value, based on a new reasonably anticipated term of possession, will be set. [Cal. Rev. & Tax. Cd. §61(b)(2) .]
(3) Leases in taxable property—The creation of a leasehold interest in taxable real property for a term of 35 years or more, including renewal options; the termination of leasehold interest in taxable real property that had an original term of 35 years or more, including renewal options; any transfer of a leasehold interest having a remaining term of 35 years or more, including renewal options; or any transfer of the lessor’s interest in taxable real property subject to a lease with a remaining term of less than 35 years, including renewal options. Only that portion of property subject to the lease or transfer will be considered to have undergone a change of ownership. For this purpose, it will be presumed that all homes eligible for homeowner’s exemption, other than mobile homes subject to personal property tax and floating homes located on leased or rented land have renewal option of 35 years or more on the lease of such land, whether or not in fact such renewal option exists in any contract or agreement. [Cal. Rev. & Tax. Cd. §61(c) ; Cal. Code Regs. 18 §462.100 .]
(4) Subleases in exempt property—A change of ownership includes sublease of possessory interest in tax-exempt real property for a term, including renewal options, that exceeds half the length of the remaining term of the leasehold, including renewal options; termination of a sublease of possessory interest with an original term, including renewal options, that exceeds half the length of the remaining term of the leasehold, including renewal options; transfer of a sublessee’s interest with a remaining term, including renewal options, exceeding the half of the remaining term of the leasehold; and transfer of a possessory interest in tax-exempt property (subject to a sublease with a remaining term, including renewal options) that does not exceed half the remaining term of the leasehold, including renewal options. [Cal. Rev. & Tax. Cd. §61(d) ; Cal. Code Regs. 18 §462.080 .]
(5) Joint tenancies—The creation, transfer or termination of any joint tenancy interest is a change of ownership, unless the transferor or spouse is one of joint tenants, or the transfer is to the spouse. [Cal. Rev. & Tax. Cd. §61(e) ; Cal. Code Regs. 18 §462.040(a) .]
(6) Tenancies in common—The creation, transfer or termination of any tenancy-in-common interest is a change of ownership, unless the change is in the method of holding title without a change of the proportionate interest, or the transfer is to the spouse. [Cal. Rev. & Tax. Cd. §61(f) ; Cal. Code Regs. 18 §462.020 .]
(7) Life estates—Any vesting of the right to possession or enjoyment of the remainder or the reversionary interest occurring at end of a life estate, or other precedent interest is a change of ownership, except for transfers by the trustor, or the spouse, or between spouses, or between registered domestic partners. [Cal. Rev. & Tax. Cd. §61(g) ; Cal. Code Regs. 18 §462.060(a) ; see Steinhart v. County of Los Angeles, Cal. S. Ct., Dkt. No. S158007, 02/04/2010; 47 Cal 4th 1298, 223 P3d 57, 104 Cal Rptr 3d 195, (2010) reversing Cal. Ct. App. (2007) 66 Cal Rptr 3d 458, Dkt. No. B190957, 09/28/2007.]
(8) Trusts—Any interests in real property that vests in persons other than the trustor or spouse when the trust becomes irrevocable, is a change of ownership. [Cal. Rev. & Tax. Cd. §61(h) ; Cal. Code Regs. 18 §462.160 .]
(9) Housing cooperative stock—The transfer of stock in a cooperative housing corporation, as defined, giving the transferee exclusive right to the occupancy and possession of property, or part thereof, is a change of ownership. [Cal. Rev. & Tax. Cd. §61(i) ; Cal. Code Regs. 18 §462.180(d)(3) .]
(10) Legal entities—The transfer of any interest in real property between a corporation, partnership or other legal entity and a shareholder, partner or any other person is a change of ownership (see “Transfers of interest in corporations, partnerships, or limited liability companies or other legal entities, below). [Cal. Rev. & Tax. Cd. §61(j) ; Cal. Code Regs. 18 §462.180(a) .]