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Joint Tenancy
Under this method of
holding title, each owner holds the property jointly with the other owners.
Upon the death of one owner, the property passes to the surviving joint tenant.
For assessment purposes, the termination of joint tenancy (other than husband
and wife or parent/child transfers) causes a reappraisal.
Tenancy in Common
Under this method
of co-ownership, each owner owns a specific percentage of the property. At
death, tenants in common pass their interest in the property to their legal
heir. The transfer of a tenancy in common interest will cause a reappraisal,
unless it is a husband/wife or parent/child transfer, but only for the interest
that has been transferred.
Legal Entities (Partnerships and
Corporations)
Under this method, a reassessment occurs when there is a
change in the controlling interest of the corporation or partnership. A
controlling interest is defined as an interest greater than 50%. These changes
in ownership are monitored and reported by the State Board of Equalization.
Leases
Whenever real property is
leased for 35 years or more, including options, reappraisal is required. If the
tenant then transfers or subleases that property with more than 35 years
remaining on the original lease, state law requires it to be reappraised again.
However, if the owner transfers or sells the leased property, a reappraisal is
required only if there is less than 35 years remaining on the lease.
Trusts
In this method of holding
title, there is only a reassessment if there has been a change of beneficial
interest or control. For example, revocable trusts (i.e. living trusts) are not
subject to reappraisal. Irrevocable trusts are reappraisable if the recipient
or beneficiary is not the current owner.
Methods of Holding Title
A change in
the method of holding title in itself does not cause a reappraisal. For
example, if two equal partners incorporate, and each owns 50% of the corporate
stock, no appraisal is required. In this case, the proportional ownership has
not changed, only the method of holding title.
Summary
Under Proposition 13, a
reassessment takes place upon a change of ownership or transfer of title. It is
always best to review any proposed ownership change with the Assessor's office
in advance to determine any possible tax consequences.
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