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?
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.
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.
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.
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.
