Real Estate Tax Update


Deadline to File Real Estate Tax Appeals for the 2020/2021 Tax Year

For property owners that disagree with their property valuation for the 2020/2021 tax year, the deadline to file an appeal is Tuesday, September 15, 2020. For property located in other counties, owners should check with the local Assessment Appeals Board. Unfortunately, these appeals would relate to the property value as of January 1, 2020, so the economic impact of Covid-19 is not likely to be considered. If you have questions about this, please contact Kevin Rose at

Commercial Properties May Lose Proposition 13 Protection

After many years of planning and political maneuvering, the opponents of Proposition 13 have settled on a ballot initiative, Proposition 15 (also known as the “Split Tax Roll”), to drastically overhaul California’s property tax structure. Proposition 13 is California’s landmark law, embedded in the Constitution that protects owners from increases in real estate taxes in excess of two percent per year. As a compromise to help ensure passage, residential property would be exempt from the tax increase.

The Basics

If passed in this November’s general election, Proposition 15 would require commercial and industrial properties to be reassessed every three years at the full fair market value of the property, as determined by County Assessors. This new assessment would be used to calculate property taxes based on the statutory tax rate, which is also limited to 1% by Proposition 13 and would remain unchanged. There would be no limit on reassessment, so many property owners could experience significant increases in real property taxes. This would wipe out the ability of property owners to plan for stable property tax increases of no more than 2% per year, and authorize County Assessors to exercise their discretion in determining the “fair market value” of real estate. Residential property, including multi-family structures (apartments), is specifically excluded from reassessment, as is commercial agricultural property.

Why Increase Taxes?

The proponents of Proposition 15 argue that commercial and industrial properties are underassessed and avoid over $11 Billion in local property taxes, which should be used to support schools, local governments and affordable housing. Advocates cite an unnamed University of California study claiming that such reassessment of commercial property will have a “net positive benefit” on jobs and the California economy. There was little discussion in the findings about the potential impact on tenants of commercial properties due to higher rents and expense pass throughs, other than the deferment for properties with at least 50% small business occupancy, discussed below. The opposition argues that this is the first step in completely dismantling Proposition 13.

The Process and Procedures for Reassessment

Starting with the 2022-2023 tax year, each County Assessor would be tasked with reassessing commercial and industrial properties to determine the value for property tax purposes. This process would be phased in over two years. Proposition 15 requires the creation of a task force comprised of different interests to recommend the statutory and regulatory details for implementation. Taxpayers would be given a “reasonable” timeframe during which to pay any tax increases. Such time frame is not defined and would have to be determined by the Legislature.

Proposition 15 imposes the burden of proof on the taxpayer with regard to any valuation disputes. Under current law, escape assessments (assessments for tax years later than the tax year the reassessment event occurred) or increased assessments due to change of ownership that are different than the purchase price require the Assessor to prove that the reassessment is justified. Property owners will likely be concerned that, due to political pressure to increase revenues, the Assessor will favor increases in value when there is any conflicting or disputed information. Local assessment appeal boards will almost certainly see a major increase in real estate tax appeals.

Some Properties Worth $3M or Less May Be Excluded

Small property owners are exempt from future reassessments if their property is worth $3 Million or less, but only after one reassessment under Proposition 15. This $3 Million threshold would be adjusted every two years for inflation, starting in 2025. This exception excludes “wealthy” property owners. This means if any owners of such low value property also own other property worth more than $3 Million, then the exception would not apply. The taxpayer has the burden of making this claim with the applicable County Assessor. The decision of County Assessors with regard to these exceptions are deemed to be final, and not subject to appeal to the local assessment appeals board, and judicial review of this exception is limited to “abuse of discretion.”

Small Business Temporary Exception

Properties that are used primarily (50% or more) for a small business, are exempt from reassessment, but only until 2025-2026. Small businesses are simply defined as businesses with less than 50 full time employees, provided that such business owns real property in California (not necessarily the same property) and is independently owned and operated. It is unclear if franchises are excluded, but it seems that the intent is to exclude franchise businesses from the exception.

The Personal Property Tax Exemption

As an incentive to the business community for support (apparently focusing on technology companies), up to $500,000 of tangible personal property and fixtures are exempt from taxation. This excludes airlines and boats. Also, small businesses (as defined above) would be fully exempt from taxation of personal property.

Use of Funds and Administration

Proposition 15 requires that all funds generated by these tax increases be distributed to community colleges (11%) and to school districts, charter schools and county offices of education (89%). There are complicated formulas and reporting requirements included as part of the administrative provisions. Each county and city is required to be compensated for additional costs incurred due to implementation of the reassessment requirements. Apparently, the payments are from the general fund, not the new tax revenues. The spending limitations in the California Constitution would not include any revenue generated by Proposition 15.

The Fight

While normally any proposed change to Proposition 13 would be highly contested, Covid-19, social unrest and the divisive presidential election may limit the publicity and focus on Proposition 15. The California Democratic Party, Bernie Sanders, and the San Francisco Board of Supervisors support Proposition 15. Opponents include the Howard Jarvis Taxpayers Association, The California Business Roundtable, the NAACP, and the California Business Properties Association. According to Ballotpedia, Proposition 15 had a 6% lead in the polls as of April 2020, with a 3% margin of error. Typically, new taxes need a large lead prior to the election as many voters become skittish when actually voting. It will be interesting to see how the voters feel about increasing taxes during recessionary times.


Authored by Reuben, Junius & Rose, LLP Attorney Kevin H. Rose.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, 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 leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

COVID-19 Business Assistance and Eviction Moratorium


Local governments, the State of California, and the federal government have or will soon pass a number of measures meant to protect businesses from the economic effects of the coronavirus. This week, we summarize several business assistance programs and available funding sources, as well as San Francisco’s moratorium on commercial evictions. (San Francisco has also put in place residential eviction protections, which we do not address in this summary.)

Commercial Evictions

In response to the emerging COVID-19 pandemic, on March 16, California Governor Gavin Newsom took the extraordinary step of issuing Executive Order No. N-28-20, authorizing local governments to, in part, effectively halt monetary evictions for commercial tenants through May 31, 2020 unless extended. Two days later, San Francisco Mayor London Breed issued a Fourth Supplement to Mayoral Proclamation Declaring the Existence of a Local Emergency dated March 18, 2020, implementing a temporary local moratorium on the commercial evictions of qualifying tenants (the “Eviction Moratorium”).

The following provides a summary of key terms of the Eviction Moratorium and looks at other avenues of equitable relief that commercial tenants may also consider following its expiration or as a means to reduce rent.

Eviction Moratorium Rules and Duration

The Eviction Moratorium applies to commercial tenants with $25 million or less in combined worldwide gross receipts for the 2019 tax year (each, a “Qualifying Tenant”). This amount will be prorated for Qualifying Tenants that operated for only part of the year.

Commercial landlords may not recover possession of a Qualifying Tenant’s premises for non-payment of rent due on or after March 17 without first providing the Qualifying Tenant with proper notice and an opportunity to cure. This required notice must give Qualifying Tenants at least thirty days to cure from the date of receipt of the notice. During the cure period, Qualifying Tenants may either pay rent or provide documentation of its inability to do so due to the “financial impact” of COVID-19. Financial impact is defined as meaning a substantial decrease in business income due to illness, disruption, reduced hours or consumer demand, or temporary closure.

If a Qualifying Tenant provides the required documentation, the cure period is automatically extended by thirty days to allow for the parties to engage in the good faith negotiation of a payment plan. There is no guidance on what qualifies as sufficient documentation, creating what appears to be a low threshold for Qualifying Tenants to satisfy. If the parties are unable to agree on a payment plan, the cure period is extended for another thirty days, provided the Qualifying Tenant submits additional documentation of its inability to pay due to COVID. In total, the cure period may be extended in this manner for up to six months.

At the end of a Qualifying Tenant’s cure period, if it has not paid all outstanding rent the landlord may commence eviction proceedings. The Eviction Moratorium also does not relieve Qualifying Tenants of their underlying obligation to pay rent or restrict landlords’ ability to eventually recover rent that is otherwise due. Further, the Eviction Moratorium does not preclude landlords from seeking to recover rent through means “other than eviction for non-payment of rent”, which would seem to leave open the door for landlords to immediately seek monetary damages through civil litigation when rent becomes delinquent. However, due to court closures and delays in processing, this remedy is unlikely to be productive.

The Eviction Moratorium is effective until April 17 but may be extended an additional thirty days by Executive Order from Mayor Breed. The above-described cure period requirements survive expiration of the Eviction Moratorium.

San Francisco’s Office of Economic and Workforce Development has been tasked with developing implementation guidelines for the Eviction Moratorium and may also grant waivers for landlords who demonstrate that an inability to evict nonpaying Qualifying Tenants “would cause significant financial hardship (e.g. default on debt or similar enforceable obligation).” In negotiating payment plans with Qualifying Tenants, Landlords should anticipate the potential duration of cure periods for Qualifying Tenants they lease to and evaluate their own likelihood of being granted a waiver.

The Eviction Moratorium Expired – Now What?

As mentioned, the Eviction Moratorium does not mean Qualifying Tenants are now completely off the hook for paying rent while the Eviction Moratorium is in effect, as commercial landlords retain the right to collect all delinquent rent and may still seek non-eviction relief. Considering this eventuality, commercial tenants and landlords alike may wonder what other avenues of relief commercial tenants might seek on the basis of financial hardship from COVID-19.

These interested parties should first look to the language of their lease. While uncommon in commercial leases, the presence force majeure clauses should be considered.  Also, the legal theories of frustration of purpose, impossibility or inability to perform clauses in real estate contracts and agreements may be applicable. In eviction or other civil proceedings to recover rent that became due as early as March 2020, commercial tenants (whether Qualifying Tenants or not) should be expected to assert similar equitable defenses, while landlords will posit their own equitable arguments of fairness. It remains to be seen how the courts will handle and evaluate these claims.

Finally, given how quickly state and local governments have moved to place a moratorium on monetary evictions, it remains to be seen if similar executive orders or legislation will be enacted with respect to other commercial lease and/or contract provisions, non-monetary or otherwise.

Business Assistance Programs

Following is a summary of state and local assistance programs to aid business during the coronavirus emergency. The federal stimulus bill is still being drafted but it is expected to pass within days; we have sourced news articles for its business and employee protection measures.


  • Deferred Business Taxes for Small Businesses: For businesses with up to $10 million or less in gross receipts, the City is deferring payment of quarterly business taxes—gross receipts, payroll, commercial rents, and homelessness gross receipts—by nine months, from April 30, 2020 to February 2021, with no interest or penalties. This will provide immediate cash-flow assistance to 8,050 small businesses. (
  • Deferred Business License Fees: The Office of the Treasurer & Tax Collector collects annual license fees on behalf of the Department of Public Health, Fire Department, Police Department, Entertainment Commission and the Office of Cannabis. The due date for license fees, March 31, 2020, is extended to June 30, 2020. (
  • COVID-19 Small Business Resiliency Fund: The City established a fund administered by OEWD to offer emergency grants up to $10,000 for employee salaries and rent for microbusinesses (up to 5 employees). Businesses must be able to show a recent loss in revenue of 25% or more, and have less than $2,500,000 in gross receipts. (
  • SF Emerging Business Loan Fund: offers loans ranging from $50,000 to $250,000 to qualifying commercial projects. The purpose of the Emerging Business Loan Fund is to originate commercial loans that support high impact businesses and projects with the potential to increase economic activity in San Francisco as well as create jobs for low to moderate income individuals. ( and
  • Paid Sick Leave – Workers and Families First Program: The City will contribute $10 million dollars for private businesses to provide up to 40 hours (5 days) of additional paid sick leave time to employees beyond existing policies through this program. This new program provides financial assistance to businesses and nonprofits and may support over 16,000 additional weeks of sick leave pay and coverage for up to 25,000 San Francisco employees. All San Francisco businesses are eligible, with up to 20% of funds reserved for small businesses with 50 or fewer employees. The City will contribute up to one week (40 hours) at $15.59 per hour (minimum wage) per employee, or $623 per employee. The employer will pay the difference between the minimum wage and an employee’s full hourly wage. ( and


  • Employment Development Division (EDD) Extension: EDD is granting a 60-day extension to file state payroll reports and/or deposit state payroll taxes without penalty or interest for employers experiencing hardship from COVID-19. (
  • Work Sharing Program: Employers can apply for the program if they are looking for alternative to layoffs due to reduced production, services, or other conditions. This program helps employers keep their trained employees so that when business conditions improve, they can avoid the expense of recruiting, hiring, and training new employees, and save employees the hardship of becoming fully unemployed. (
  • Rapid Response Service for Businesses: Rapid Response teams will meet with businesses/employers to help avoid layoffs where possible and support employees through the process. Services can include upgrades to current worker skills, customized training, career counseling, job search assistance, help with filing unemployment insurance claims, and information about education and training opportunities. (


  • Employee/unemployment benefits. Unemployment insurance will be extended by 13 weeks, and employee benefits will be enhanced for a period of four months. Workers will maintain their full salaries if forced out of work as a result of the pandemic. Freelances and gig workers will be offered these same benefits.
  • Small business loans with forgiveness for companies that keep employees. $350 billion in lending programs for small businesses that keep payrolls steady, and small businesses that pay their employees for duration of the crisis will have loans forgiven.
  • Federal Reserve loans. The Federal Reserve will leverage $425 billion for loans to help “broad groups of distressed companies.”


Authored by Reuben, Junius & Rose, LLP Attorneys Mark Loper and Michael Corbett

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, 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 leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.