Although California’s residential real estate market has remained strong, commercial vacancies are rising and property values are plummeting. You may have the possibility to request a property tax reassessment on a commercial property.
If a property has declined in value, a county assessor can review the property’s value and can adjust the property tax assessment, if warranted. Proposition 8 was passed in 1978 and an amended Proposition 13 to allow temporary reductions in assessed value in cases where real property suffers a decline in value due to the real estate market, the neighborhood, or the property itself due to damage or destruction.
Originally, the base year value could only be reduced when the governor declared a disaster. Proposition 8 changed this by stating, “The full cash value base may be reduced to reflect substantial damage, destruction, or other factors causing a decline in value.” However, the Proposition 8 reassessment does not create a permanent new base year value.
Upon request, most county assessors will review a property’s assessment for a possible decline in value. How the review is performed will depend on each county’s requirements for a decline in value review. The typical review process generally follows these steps:
- Complete the assessor’s request form or contact the assessor by phone.
- Provide the assessor with information that supports the property owner’s opinion of the market value of their property. This is typically sales of comparable properties that sold close to January 1st, but no later than March 31st.
- Submit the request form and or information requested by the regular appeals deadline for the county.
- An appraiser from the assessor’s office will review the information submitted and perform a market value analysis of the property as of January 1st.
- Then the assessor’s office will determine whether the current market value of the property is lower than its current factored base year value. If the assessor agrees the market value is lower than the factored base year value, the lower value is enrolled.
- After the review is complete, the property owner is notified of the assessed value.
If a property owner disagrees with the assessed value after the review has been completed, they can file an assessment appeal application with the clerk of the county’s assessment appeals board.
Once a property’s assessment has been reduced under Proposition 8, the assessor reviews the assessment annually to determine whether it should remain in Decline in Value status.
If the market value recovers, then the assessed value may be increased up to the current factored base year value, even if the increase is above Proposition 13’s two-percent increase cap for the year. Only the most recent January 1st assessment can be reviewed.
Proposition 8 does not allow for relief for prior years and does not apply to supplemental assessments.
Property owners still have to timely pay property taxes according to the tax bill they received, or penalties and interest will apply regardless of any pending reduction request.
If the assessor finds that a reduction in assessed value is warranted, the assessor will send a notice of correction and a revised tax bill or refund based on the difference in value.
If a property owner has not been notified of the results of the assessor’s review by the time the deadline to file an assessment appeal in their county draws near, consider filing a formal assessment appeals application to make sure the property’s assessment is reviewed.
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