?"The Mansion Tax" - What is it? When does it go into effect? What does it mean for me??

Measure ULA, commonly known as the “Mansion Tax,” would impose a new “Homelessness and Housing Solutions Tax” on transfers of residential and commercial real property in Los Angeles valued in excess of $5 million. The new law is slated to come into effect on April 1, 2023.

What does this mean for you?

?- A tax of 4 percent of the property’s value will be imposed on the sale of properties valued between $5 million and $10 million. If the property is valued at $10 million or more, the sale will be subject to a 5.5 percent tax.

?- The value of the property for the purposes of the measure will include the value of any lien or encumbrance remaining on the property when it is sold. By way of example, starting on April 1, 2023, a seller of real property valued at $100 million will pay $5.5 million more in transfer taxes to the city.

?- Measure ULA will become law on Jan. 1, 2023, but it will not impact transactions until April 1, 2023.?

?- Certain qualified affordable housing organizations are exempt from the tax. To qualify for an exemption, the transferee must show a history of affordable housing development and/or housing property management experience, as determined by the Los Angeles Housing Department. Additionally, the measure will not apply to certain housing, nonprofit, and public entities.

What are the potential effects of the Measure ULA “Mansion Tax”?

The impact of the measure will likely be widespread. In addition to owners of high-value residential real estate, commercial tenants and occupants city-wide will bear the brunt of the new tax. Rents could rise, businesses may close and others may choose not to invest or buy property in the city, absent some correction in the sale price of assets that accommodates the new transfer tax. Additionally, even though the tax affects property with a value at or more than $5 million, there will be a trickle down impact on small- and medium-size commercial and residential sale transactions.