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California has a 0.77% tax on real estate, including land. California also has passed a bill that prevents developers and land owners from building on or near earthquake fault lines which essentially could render some land useless.

What happens with property taxes in California in case a buyer discovers he is stuck with land he can't build anything on?

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    “which essentially could render some land useless” — useless? Psch. Still perfectly good for standing on, sitting on, laying down on, jumping up and down on... the possibilities are endless! I happen to know the seller will take an offer that would make this plot a bargain, so let's talk numbers. – Paul D. Waite Aug 14 at 13:29
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    Aside: This kind of dispute is a situation that letting the taxing authority forcibly buy property at the price that the taxpayer assesses its value at would solve. If you think this property is only worth $50, assess it at that rate and only pay the taxes on that value -- if the state pays you $50, takes it from you, and then auctions it off to someone else... well, you got exactly what you thought it was worth, right? – Charles Duffy Aug 14 at 17:00
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    @Paul D. Waite: Or farming. Lots of vineyards near earthquake faults, including this one that straddles the San Andreas fault: wsj.com/articles/SB125936328750267155 Or donate the land for open space or to a conservation organization, and get a tax writeoff... – jamesqf Aug 14 at 17:01
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    @PaulD.Waite Whoa, you didn't mention the wine! I've gotta get in on this, too! – Brian Aug 14 at 19:40
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    @CharlesDuffy That's one of those things that sounds like a good idea when you look at it at first, but not once you think through the implications. As just one example, it doesn't take into account moving costs. A full examination of the problems would hardly fit in a comment. And eminent domain requires showing cause. – Acccumulation Aug 15 at 0:48
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First, if this change occurred before you bought the property, then this is a critical failure in your due diligence, and the fault is at your feet. Most of us use a variety of advisors in land purchases, such as a title insurer*, Realtor, or attorney.

If the change occurred after you bought the property, then it may be worth talking to an attorney -- this is a "Regulatory Taking". There's a considerable body of case law that establishes the government's culpability to you when they do that.

That said, you should take a closer look at the "bill" and see whether it prohibits any building; or whether improved building structures would be allowed. For instance a houseboat in a pond is an extreme example of an earthquake-resistant structure.

I'm advising the above so you have your facts straight. I'd hate for you to get to the next part and be blindsided. A significant part of the value of land is the ability to build on it. ** So you can now, at least, ask that the land be re-assessed to the much lower value it has as a family camp-out spot.


* I work with a title insurance company, and I hire them pre-purchase to do the same title search they would do as part of writing title insurance, but to give me the data. If I do buy the land, they refund my payment and fold the cost into the title insurance which is charged to the seller.

** my old neighborhood had a parcel worth $400k with a nice 1950 home on it, and $500k with the house demolished. The market demanded a tabula rasa for yet another McMansion. So the bank (they got it in the 2008 collapse) did exactly that.

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    "the fault is at your feet" No pun intended? – Acccumulation Aug 15 at 0:49
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    @Acccumulation No, I did not know I did that. – Harper - Reinstate Monica Aug 15 at 3:32
  • Interesting. I tried to contact one geologist to conduct geological survey under one of the contingencies. Geologist refused because he though too much liability would be involved - I think he is afraid that seller may go after him in case geologist discovers problems with his land (geologist was fine doing the survey once I buy the land, but I don't want to take that risk on myself). So the typical "due diligence" buyer can do is by letting title insurer to take all the risks? – user389238 Aug 16 at 2:18
  • I'm confused by this answer (and why it's accepted) -- it seems focused on what OP may have suffered via loss in value of the land, and what remedy may exist to mitigate this loss. But that wasn't the question. OP accepts that the land is worth little now, and is not complaining about the loss itself. OP is only complaining about having to pay taxes based on an unrealistically high valuation. This answer doesn't even mention taxes. Maybe this answer is a "frame challenge" saying "forget the taxes, the bigger issue is the actual loss you've already suffered"? But that should be explicit. – nanoman Aug 17 at 7:06
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    @Cerno another argument in favor of my houseboat-in-a-pond idea lol... – Harper - Reinstate Monica Aug 17 at 16:00
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Property tax in California is administered at the county level. You can contact your county tax assessor and request a reassessment if you think the property’s value has decreased.

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    Exactly. I’d imagine that most land going from a buildable lot to non-buildable is going to drop 90% or more in value. – JTP - Apologise to Monica Aug 14 at 3:56
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Every jurisdiction in the US (city/county/state) has a process for appealing the assessed value of a property. Some only do it during a specific window of time each year, others are more flexible. You will have to contact them to see the procedure.

If this is a new change to your ability to build on the property, then you might see some tax relief. If it is new this year and impacts many properties they should have a plan for addressing all the properties at once.

If on the other hand if this ban on this piece of property has existed for a while, it is possible that it has already been factored into the assessed value.

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Some Background

First, remember that there is no state property tax in California. Property taxes are assessed by counties.

Next, I don't know where you get that 0.77% from. Most (if not all) counties in California tax at the maximum allowable rate under Proposition 13 which is 1% of the assessed value. When there is a sale, the new assessed value is the amount of the sale, and going forward, the assessed value may not be increased by more than 2% per year.

A land owner may request a reassessment if they think it will benefit them, but because of the Prop 13 restrictions, it would rarely be beneficial. About the only scenario is a severe loss in value within the year or two after purchase (such as the 2008 crash).

People may be surprised to learn that in California, despite its high cost of housing, high income tax, high car registration, high almost-everything, property tax is actually pretty cheap. My personal opinion is that this is actually part of the reason that the real estate market in California is expensive and volatile--the low tax rate makes it attractive to non-resident investors.

To Your Actual Question

Knowing what we now know about the Prop 13 limits on California property tax, how do you handle your situation?

When was the property purchased?

If you just bought it, and the seller did not disclose important information like being in a fault zone, you might need to hire a lawyer.

If you bought it 20 years ago as an investment and it just lost value because of the new building restriction, you might consider having it reassessed to a lower value. But remember from Prop 13 that it's probably already under-assessed and you are probably already under-paying property taxes by a great deal. Your annual tax bill will show your assessed value to help you decide.

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    Your last paragraph is correct, but it's worth pointing out that there is no risk the assessor will re-assess the value higher than was previously assessed, due the limit on increased taxable value each year. (One risk: if the owner had made improvements like an addition on a house, which somehow hadn't been included in the assessed value, the county could increase the assessed value to account for those --- but that isn't likely in OP's scenario) – The Photon Aug 14 at 18:11
  • The 0.77% may be a division between county, town or township... we have that here (not in CA), we pay some assessment to the town and another to the township. – Harper - Reinstate Monica Aug 17 at 16:02

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