Change In Ownership
A change in ownership includes almost all transfers of title in real property. Under Proposition 13, real property is reappraised for a change in ownership.
Some changes in ownership are excluded from reappraisal; see Exclusions for more details.
Note: It is advisable to consult an attorney or other expert before changing your present or future ownership of property. The Assessor's Office cannot give legal advice; it can only explain which transfers shall be reappraised.
A contract that conveys ownership, or a portion of ownership, from one party to another is considered a change in ownership, regardless of whether or not it was recorded. Upon discovery by the Assessor, the unrecorded contract will be evaluated. If it is determined that the property was under-assessed due to an unrecorded contract of sale, the Assessor must go back and issue escaped assessments for the effected years.
It is important for property owners to know that legal entities, such as corporations, limited liability companies and partnerships exist in their own right and are distinct in many ways from the individuals that own shares in them. Some change in ownership laws and exclusions from reassessment that apply to transfers between individuals do not apply to legal entities.
Changes in ownership of legal entities, for assessment purposes, are defined in Revenue and Taxation Code sections 61, 62 and 64 as well as in Board of Equalization Rule 462.180. There are two primary ways that a re-assessment for change in ownership occurs:1) Change in Control
A change in controlling interest occurs at the time that one owner of the legal entity gains control of more than 50% of the ownership shares. When this threshold is reached it results in a 100% reappraisal of all real property owned by the entity. Legal entity transfers can be complicated. The following is a simple and straightforward example:
Corporation X is owned by A: 30%, B: 30%, C: 20% and D: 20%.
If owner A (30% interest) acquires owner B's 30% interest, then A would own 60% of corporation X. In this event A would gain controlling interest. The result would be a 100% reassessment of all real property owned by corporation X.
Alternately, if owner A (30% interest) were instead to acquire owner C's 20% interest, then A would own 50% of corporation X. In this event A would not gain controlling interest. The result would be no reassessment of the real estate owned by corporation X.
2) Change in Ownership without change in control
A reassessment can also occur when the original owners of a legal entity have cumulatively transferred more than 50% of their interests, even if no one person or legal entity has gained a controlling interest in the process. This can frequently occur in family owned entities where parents, as original entity owners, transfer ownership interests to their children or grandchildren over time. (Note: Parent-Child exclusions from reassessment do not apply to transfers of interests within, or to, legal entities.)
Pursuant to Revenue and Taxation code sections 480.1 and 480.2, Changes in Control and Changes in Ownership, as noted above, must be reported to the State of California, Board of Equalization (BOE) within 90 days of the date of change in control or change in ownership. Failure to timely report changes in control or ownership may result in significant penalties and, pursuant to Revenue and taxation code 532(b)(3), will result in the waiving of statutes of limitation for correction of prior-year assessments.
You may also visit the Board of Equalization “Legal Entity Ownership Program” webpage at http://www.boe.ca.gov/proptaxes/leop.htm.
If you have additional questions, please contact the Assessor's Change in Ownership Division at (209) 525-6461.
The creation of a long term lease is a change in ownership and is defined in section 61 of the California R&T code as: The creation of a leasehold interest in taxable real property for a term of 35 years or more (including renewal options).