The Opportunity
In these challenging economic times, real estate owners are looking for creative ways to cut operating expenses. Reducing real estate taxes is one means to do so. Every year, property owners have the opportunity to appeal the taxable value of their real property, a process commonly known as a “Proposition 8 Appeal”, named after the California statewide proposition. This law, codified in Section 51 of the California Revenue and Tax Code, provides for the right to request a temporary reduction in the taxable value of the property due to economic conditions, damage, or other factors. For each reduction in value of $100,000, the property owner could save between $1,000 and $2,000 for that tax year, depending on the tax rate for the applicable county. Since many property values have experienced steep declines, the savings could be significant.
The Process
In San Francisco, the tax appeal process is started by filing an Application for Changed Assessment, in the form provided by the Assessment Appeals Board. There is a filing fee of $30 per application. Once the application is filed, the Assessment Appeals Board will set the case for a hearing, usually 6-9 months after the application is filed. In some cases, the property owner will be able to work out an agreement with the Assessor’s office before proceeding to the hearing. Other counties have similar procedures.
If the appeal is successful, or a settlement is reached, then the property value for the tax year that was appealed is reduced. The owner would then receive a refund for any property taxes that were paid based on the previously assessed value. (Unfortunately, the taxpayer must pay the taxes at the old rate in order to avoid interest and penalties.) This new value would only be good for the tax year that was appealed. The following year, the property value automatically increases to the original base year value, plus the permitted inflation factor (no more than 2%). The owner must file a new appeal every year to take advantage of the property’s decline in value.
Deadlines
The Proposition 8 appeals must be timely filed, or the opportunity is lost. The deadline for San Francisco properties is September 15, 2009. Other bay area counties have the following deadlines:
Alameda: September 15, 2009
Contra Costa: November 30, 2009
Marin: September 15, 2009
Sacramento: November 30, 2009
Santa Clara: September 15, 2009
Sonoma: November 30, 2009
Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.
