If a transfer of real property results in the transfer of the present interest and beneficial use of the property, the value of which is substantially equal to the value of the fee interest, then such a transfer would constitute a change in ownership unless a statutory exclusion applies. While a transfer of real property may constitute a change in ownership, the legislature has created a number of exclusions so that some types of transfers are excluded, by law, from the definition of change in ownership. Thus, for these types of transfers, the real property will not be reappraised.
An exclusion occurs when the assessor does not reassess a property because the property or portions of the property are automatically excluded from reassessment or is eligible to be excluded if the owner properly files a claim. The following list covers most changes in ownership that are excluded from reassessment, either automatically or by claim; however, there may be other excludable qualifying transactions not listed here. Thus, you should contact your local assessor or an attorney if you have a specific transaction that you would like to discuss.
Changes in ownership that require a claim to be filed to avoid reassessment include the following:
- The purchase of a replacement dwelling by a person who is 55 years of age or older, where the replacement dwelling will be that person’s principal place of residence and is equal or lesser in value than the original residence. In such cases, the base year value of the previous home may be transferred to the new home so that the new home will not be reassessed to its current fair market value but will be able to retain the old home’s base year value. The original and replacement residences must generally be located in the same county; however, as of September, 2013, nine counties allow a transfer of the base year value from the original property located in another county to a replacement dwelling located in that county ( Proposition 60/90).
- The purchase of a replacement property if the original property was taken by governmental action, such as eminent domain or inverse condemnation (Proposition 3).
- The purchase of a new principal residence by a person who is severely disabled (Proposition 110-same as Propositions 60/90).
- Transfers of real property between registered domestic partners that occurred between January 1, 2000 and January 1, 2006 (section 62(p)) of the Revenue and Taxation Code). County assessors are required to reverse any reassessments that resulted from any transfers of real property between registered domestic partners that occurred during this time period if the taxpayer files a timely claim. However, relief for such a reversal is applied only on a prospective basis. The registered domestic partners will not receive any refunds.
Changes in ownership that are automatically excluded from reassessment include the following:
- Transfers of real property between spouses, which include transfers in and out of a trust for the benefit of a spouse, the addition of a spouse on a deed, transfers upon the death of a spouse, and transfers pursuant to a divorce settlement or court order (section 63 of the Revenue and Taxation Code; Rule 462.220).
- Transfers of real property between registered domestic partners that occur on or after January 1, 2006, which include transfers in and out of a trust for the benefit of a partner, the addition of a partner on a deed, transfers upon the death of a partner, and transfers pursuant to a settlement agreement or court order upon termination of the domestic partnership (section 62(p)) of the Revenue and Taxation Code).
- Transactions only to correct the name(s) of the person(s) holding title to real property or transfers of real property for the purpose of perfecting title to the property (for example, a name change upon marriage).
- Transfers of real property between coowners that result in a change in the method of holding title to the property without changing the proportional interests of the coowners, such as a partition of a tenancy in common.
- Transfers between an individual or individuals and a legal entity or between legal entities, such as a cotenancy to a partnership, or a partnership to a corporation, that results solely in a change in the method of holding title to the real property and in which proportional ownership interests of the transferors and the transferees, whether represented by stock, partnership interest, or otherwise, in each and every piece of real property transferred, remains the same after the transfer.
- The creation, assignment, termination, or reconveyance of a lender's security interest in real property or any transfer required for financing purposes only (for example, co-signor).
- The substitution of a trustee of a trust or mortgage.
- Transfers that result in the creation of a joint tenancy in which the transferor remains as one of the joint tenants.
- Transfers of joint tenancy property to return the property to the person who created a joint tenancy (i.e., the original transferor).
- Transfers of real property to a revocable trust, where the transferor retains the power to revoke the trust or where the trust is created for the benefit of the transferor or the transferor's spouse.
- Transfers of real property into a trust that may be revoked by the creator/grantor who is also a joint tenant, and which names the other joint tenant(s) as beneficiaries when the creator/grantor dies.
- Transfers of real property to an irrevocable trust for the benefit of the creator/grantor or the creator/grantor's spouse.