How Will Deed Rescission Affect Property Tax Assessments in California?

 Posted on November 11, 2021 in Taxation Law

Property owners in the state of California are often subject to high property taxes. Fortunately, while a home or commercial property may increase in value, California laws limit the amount by which property taxes can be increased. Each year, property taxes cannot increase by more than 2 percent, regardless of how the value of the property has changed. However when ownership of property is transferred, this may trigger a reassessment of property taxes based on the property’s current market value, and the new owner may be required to pay higher taxes than the previous owner. In cases where the parties to a transaction did not fully understand the tax consequences of a transfer of ownership, a deed may be rescinded, ensuring that property taxes will revert back to their previous levels.

Requirements for Deed Rescission

A deed rescission will return ownership of property to the previous owner as if the sale or transfer of property had never occurred. To be legally valid, a deed rescission must be mutual, meaning that all parties involved in the transaction must consent to the rescission. A rescission must be performed within a reasonable amount of time. Since each situation is unique, rescissions will be handled on a case-by-case basis, and a County Assessor will determine whether a rescission was completed promptly and within a reasonable time period. An assessor may look at factors such as whether the parties received benefits prior to the rescission, including earning income through ownership of the property.

All parties involved in a rescission must be restored to the position they were in before the transaction took place. Any payments received must be refunded, or other property received in exchange for real estate must be returned to the original owner. An assessor may look at different forms of evidence to determine whether the parties were restored to the status quo, such as bank records showing that funds were transferred or tax returns that demonstrate that the proper party received income from their ownership of the property.

Once a rescission is completed, the value of the property used to determine the amount of property taxes that will be paid will revert to the property’s adjusted base year value prior to when ownership of the property was transferred. The property’s value will be factored forward based on the date of the rescission. While this may restore the previous property tax levels for a property, any supplemental property taxes that were assessed prior to the rescission must be paid, and any property taxes that have been paid cannot be refunded.

Contact Our San Jose Property Tax Attorney

If you have experienced unexpected property tax consequences following the transfer of real estate property, John D. Teter Law Offices can help you complete a deed rescission. Attorney Teter will work with you to ensure that the proper information is provided to County Recorders and County Assessors to rescind a deed. He can also assist with the drafting of new deeds, ensuring that you understand the property tax consequences, and he will work to help you achieve the best results possible. Contact our San Jose, CA property tax lawyer today at 408-866-1810.

Sources:

https://www.boe.ca.gov/proptaxes/pdf/lta21033.pdf

https://www.boe.ca.gov/proptaxes/pdf/lta18023.pdf