A California investor holds a property that has declined in market value since the Prop 13 base year. The current assessed value under Prop 13 is $800,000, but the current market value is only $650,000. The investor asks whether the assessed value can be reduced. Under California law:
Correct Answer
B) The property owner can apply for a temporary reduction in assessed value (Prop 8 reduction) to reflect the lower market value, with the value returning to the Prop 13 base when the market recovers
Under Proposition 8 (as codified in Revenue and Taxation Code §51(a)(2)), when a property's market value falls below its Prop 13 assessed value, the property owner can request a temporary reduction in assessed value to the current market value. This is called a 'Prop 8 reduction' or 'decline in value reassessment.' If the market subsequently recovers, the assessed value increases back toward the Prop 13 base value (with no more than 2% annual increases until it reaches the factored base year value).
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Key Terms:
Related Concepts
A special warranty deed guarantees that the grantor has not caused any title defects during their period of ownership, but does not warrant against defects that existed before the grantor acquired the property.
Title insurance is a policy that protects the insured party against financial loss from defects in title that were not discovered during the title search. Unlike other insurance, it covers past events rather than future risks.
A title search is an examination of public records to determine the history of ownership, liens, encumbrances, and other interests affecting a property. It verifies that the seller has the legal right to transfer the property.
More Transfer Of Property Questions
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- → Under California law, what is the consequence when a property buyer fails to file the Preliminary Change of Ownership Report (PCOR) at the time the deed is recorded?
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