Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2018

Property Tax Annotations

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Annotation 220.0361

220.0361 Leasehold Improvements. To determine whether there has been a change in ownership of tenant-constructed improvements when the land owner (lessor) undergoes a change in ownership, it is necessary to determine who owns the improvements. According to Auerbach v. Assessment Appeals Board (2006) 39 Cal.4th 153 and Phelps v. Orange County Assessment Appeals Board No. 1 (2010) 187 Cal.App.4th 653, the key factor in determining whether tenant-constructed improvements belong to a lessor for property tax purposes is whether the improvements must be surrendered to the lessor upon lease termination. In a situation where the lease requires any buildings or structures owned by the lessee be removed prior to termination of the lease, then the improvements would be considered owned by the lessee and not by the lessor. Thus, a change in control in the lessor would not result in a change in ownership of the improvements owned by the lessee. C 1/11/2011.