Content copyright . Joseph Larkin. All rights reserved.
A. - In 1978, California voters passed Proposition 8, a constitutional amendment to Article XIII A that allows a temporary reduction in assessed value when real property suffers a decline in value. A decline in value occurs when the current market value of real property is less than the current assessed (taxable) factored base year value as of the lien date, January 1. Proposition 8 is codified by section 51(a)(2) of the Revenue and Taxation Code.
Real property may decline in market value from one lien date to the next lien date; however, it will not benefit from a lower assessment unless its market value falls below the current factored base year value. For example, if you purchase your property during a time when the real estate market falls dramatically, such as during the years 2005 through 2008, or if your property is substantially damaged due to a storm or fire that causes a reduction in your property’s value, it is likely that your property will benefit from a Proposition 8 reassessment. The decline in value is typically temporary and may be the result of changes in the real estate market, the neighborhood, or the property itself.
Q. - How does the proposition work?
A. - When the market value of a property on the January 1 lien date falls below the factored base year value (assessed value), the assessor is obligated to review the property and enroll the lesser of the factored base year value or market value. The factored base year value of real property is the market value as established in 1975 or as established when the property last changed ownership or when the property was newly constructed.
A property that has been reassessed under Proposition 8 is then reviewed annually to determine its lien date value. The assessed value of a property with a Proposition 8 value in place may increase each lien date (January 1) by more than the standard two percent maximum allowed for properties assessed under Proposition 13; however, unless there is a change in ownership or new construction, a property’s assessed value can never increase above its factored Proposition 13 base year value after adjusting for the annual increase.
Example: A property previously assessed at $500,000 received a Proposition 8 reduction in value to $450,000 as of the lien date. By the next lien date, the property’s market value had increased five percent, or $22,500, and, thus, the assessor enrolled a value of $472,500 for that year. Because the current market value is less than its current factored base year value of $510,000 ($500,000 + 2% annual increase), increasing the assessed value by five percent is legal since the two percent limitation of Proposition 13 applies only to increases in the base year value. Here, since the current market value continues to be less than the factored base year value, an increase beyond the two percent limitation is appropriate. As the year progresses, property values rebound dramatically and the market value of the property is now $525,000. Because the current factored base year value for this year is $520,200 ($510,000 + 2%), which is lower than the current market value, the adjusted factored base year value would be reinstated and enrolled, and the annual increase will again be limited to two percent.
Q. - The assessed value of my property increased more than two percent this year. There was no change in ownership or new construction. Doesn’t Proposition 13 limit annual increases in value to two percent?
A. - Yes, under Proposition 13, base year values may not be increased more than two percent per year. However, this two percent limitation applies only to increases in the base year value. Under section 51 of the Revenue and Taxation Code, Proposition 8 values are not considered base year values, but are declines in value; thus a property assessed under Proposition 8 is not restricted to the maximum two percent
Q. - What is a comparable sale?
A. - property sold with features that are similar to your property is a comparable sale. Comparable sales information helps you analyze the value of your home. For example, a property similar in location, zoning, size, number of bedrooms and bathrooms, age, quality and condition to yours that sold in the "open" market is a comparable sale. However, not all of these factors must be the same as your property to be a comparable sale – "similar" does not mean "identical." An "open" market means the transaction must have been offered for sale under typical market conditions; thus, a sale to a relative or a sale under distress may or may not have been sold under open market conditions. If using such sales, further investigation is required to determine if any unusual or favorable conditions were involved.
Q. - The local newspapers and other real estate reports indicate that property values in my neighborhood have declined ten percent this year. Wouldn't this be proof? Do I still have to provide comparable sales?
A. - Providing newspaper articles or other reports indicating that values have declined are not sufficient justification for a reduction in value on your property. You should provide a minimum of two comparable sales if your county assessor requires it.
Q. - I think the assessed value of my home has been higher than market value for the past two years. Can I apply for Proposition 8 review for both last year and this year?
A. - No. Only the most recent January 1st assessment may be reviewed. Proposition 8 neither allows for relief pertaining to other dates / prior years nor applies to supplemental assessments. If you are questioning the assessment from a prior year, you must go through the assessment appeals process.
Q. - If my assessed value is reduced under Proposition 8, how long will it last?
A. - Proposition 8 reassessments last at least one year; the value reductions are not permanent. The assessed value may either decrease or increase depending on the market value of your property on January 1 of each subsequent year. Your assessed value, however, will never result in an increased value that is more than the trended base year value. Once the market value of a Proposition 8 property exceeds its Proposition 13 factored base year value, the Proposition 13 value will be reinstated as the upper limit of assessed valuation.
Please note that your factored base year value continues to increase by an annual inflation factor of no more than two percent each year even during the time your property is assessed under Proposition 8.
Q. - I purchased my home in July 2006 for $600,000, which was the assessed value on my 2006-2007 property tax bill. Sales of similar model homes in January through March 2007 were $600,000; however, sales in September and October of 2007 were $570,000, and current listings for sale are even lower. Does my home qualify for a Proposition 8 reassessment?
A. - Your property does not qualify for Proposition 8 relief for the 2007-2008 tax year because the assessed value is not lower than the market value on January 1, 2007. However, you may qualify for Proposition 8 relief for the next tax year, 2008-2009, if the market value on January 1, 2008, continues to be lower than the assessed value as the recent sales may indicate
Q. - I disagree with the Notice of Assessed Value I have received from the County Assessor, what can i do?
A. Give us a call for a free 15 consultation.
Q. - Is there a cost associated with filing an assement appeal application with the county?
A. Do to the budget crisis in California, many counties are now charging between $35 - $200 just to file an appeal, in some cases this fee in non refundable. Therefore it is important to have a competent professional represent you so that you may direct those savings elsewhere.
Q. - Doe's JL Financial Solutions charge a fee to represent their clients?
A. We do not charge a fee for consultation service. The taxpayer(s) will interact directly their county Assessor or Assessment Appeals Board when contesting their Assessed Values or seeking a Claim for Refund of Tax Payments.
