New Construction Enrollment and the Ability to Appeal Base Year Values

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Capturing New Construction in California

In California, new construction can be captured in various ways, depending on the county and the specific property type. Counties often use different methods to assess new construction, but a common approach is the income approach. This method evaluates the potential income that the property can generate, which is particularly relevant for commercial properties like hotels, office buildings, and industrial facilities.

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For example, when a new industrial building is constructed, the county may assess its value based on the expected revenue from the newly signed tenant lease. This income-based approach helps to provide a realistic valuation that reflects the property’s earning potential.

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Reflecting Proposition 13 Protection

It’s crucial to consider the protections offered by Proposition 13 when assessing new construction. Proposition 13 limits the annual increase in assessed value to 2% unless there is a change in ownership or new construction. This protection ensures that the underlying land value remains stable, providing a safeguard against significant tax increases.

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For instance, if a property undergoes new construction, only the value of the new improvements is reassessed, while the land value remains protected under Proposition 13. This distinction is vital for property owners to understand, as it can lead to substantial tax savings.

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Rising Land Values Post-Pandemic

The COVID-19 pandemic has significantly impacted real estate markets, particularly for industrial and R&D properties. In many areas, land values have risen due to increased demand for logistics and research facilities. This trend can be advantageous for property owners when appealing base year values.

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For example, an industrial property in a high-demand area may see its land value increase post-pandemic. If the property owner can demonstrate that the land value has risen independently of the new construction, they may be able to appeal the base year value and secure a lower tax assessment for the improvements. This appeal process can result in significant tax savings, as the higher land value is protected under Proposition 13, and only the new construction is subject to reassessment.

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Conclusion

Understanding how new construction is captured and assessed in California is essential for property owners. By leveraging the income approach and recognizing the protections offered by Proposition 13, property owners can ensure that their assessments are fair and accurate. Additionally, the post-pandemic rise in land values presents an opportunity for property owners to appeal base year values and achieve tax savings. Working with our tax professionals can help navigate these complexities and optimize property tax outcomes.

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At Property Tax Resources, LLC, we believe that property tax consulting should be based on a deeply embedded relationship with our clients. Our goal is to align ourselves completely with our client’s objectives and deliver the results they are seeking. We are a team of seasoned professionals with the necessary expertise to produce exceptional results across the country. Visit our website for more information:

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www.ptaxresources.com Property Tax Resources, LLC [email protected]

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