Partial Prop 13 repeal would raise commercial real estate taxes

On Behalf of | Aug 24, 2018 | Commercial Real Estate |

Since California voters passed Proposition 13 in 1978, residential and commercial real estate property taxes in the Golden State have been limited. Upward reassessment of property values cannot exceed 2 percent every year, and the law caps property taxes at 1 percent of assessed value at the time of acquisition. A new initiative scheduled for the 2020 ballot would partially repeal these tax limits and expose commercial real estate to higher property taxes.

Proponents want higher assessments on commercial properties to increase state and local tax collections. The estimated gains could reach over $11 billion a year. Schools could expect an additional $4.5 billion if the initiative passes.

Activists succeeded in getting the initiative on the ballot after collecting 860,000 signatures. Certification only required 585,000 signatures, which means a significant part of the voting population appears supportive of splitting tax rolls between residential and commercial.

The business community, which would be paying the higher taxes, opposes the initiative. Critics argue that businesses already contend with high expenses in the state, and higher taxes would increase costs to consumers. Other people point out that cash-hungry local governments might approve more commercial building precisely when the state needs more residential units. Polling currently shows that 54 percent of voters approve of the proposal.

Although potential changes in tax laws could concern investors and developers, problems that arise during commercial real estate transactions must be evaluated under current laws. A person confronted by a problem like a title dispute, lender issue or construction lawsuit could consult an attorney. A legal review of deeds or contracts could produce insights into how to resolve a case or calculate damages. An attorney could defend the client’s position during private negotiations or arbitration. If a case needs to go to court, an attorney could manage the litigation.

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