Hidden Property Tax Triggers

Last week we talked about property taxes being reset when land changes hands. That is true, but it is not the whole story. One of our listeners, Steve related a personal story which I’m going to share here. He writes:

Your property tax episode struck home. My family owned what started as landfill since 1969 in California. In the late 90’s it was full and a race track built on it. The track builders signed a 25 year ground lease with extensions. Since the lease was this long it was deemed an effective sale. Taxes went from 15k/ year to over $200k per year. Years later when we had to evict the tenants we got stuck with the new amount 😂🤣. If the lease was structured differently this could have been avoided. Expensive family lessons learned by my dad or grandpa are branded into my memory.

Yes, Steve, this is a nuance that I missed in my earlier episode. In some jurisdictions, a reassessment can be triggered even when the deed never changes hands. A long-term ground lease can do it. An assignment of that lease can do it. In at least one important jurisdiction, a tenant default that terminates the lease can do it. And if you own property inside an entity, sometimes the transfer of interests in the entity can do it too.

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