Last week we talked about property taxes being reset when land changes hands. That is true, but it is not the whole story. One of our listeners, Steve related a personal story which I’m going to share here. He writes:

Your property tax episode struck home. My family owned what started as landfill since 1969 in California. In the late 90’s it was full and a race track built on it. The track builders signed a 25 year ground lease with extensions. Since the lease was this long it was deemed an effective sale. Taxes went from 15k/ year to over $200k per year. Years later when we had to evict the tenants we got stuck with the new amount 😂🤣. If the lease was structured differently this could have been avoided. Expensive family lessons learned by my dad or grandpa are branded into my memory.

Yes, Steve, this is a nuance that I missed in my earlier episode. In some jurisdictions, a reassessment can be triggered even when the deed never changes hands. A long-term ground lease can do it. An assignment of that lease can do it. In at least one important jurisdiction, a tenant default that terminates the lease can do it. And if you own property inside an entity, sometimes the transfer of interests in the entity can do it too.

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Hidden Property Tax Triggers