Property Taxes
Common area real estate owned by a homeowners association is not subject to property taxes. Taxes on common property are indirectly paid by the membership through their real property taxes. The taxable value of common areas is reflected in the increased market value of members' properties created by common area pools, clubhouses, riding trails, parks, etc. Property taxes on common areas are billed to and paid by all homeowners, not the association. (Lake Forest CA v. County of Orange; Nellie Gail Ranch OA v. McMullin) The tax code allows planned developments to avoid double taxation on their common areas.
For the purposes of this section, “common area” shall mean the land and improvements within a lot, parcel, or area, the beneficial use and enjoyment of which is reserved in whole or in part as an appurtenance to the separately owned lots, parcels, or areas, whether this common area is held in common or through ownership of shares of stock or membership in an owners' association. (Revenue & Tax Code § 2188.5(a)(2))
Amending Parcel Maps
Common area parcels must be mapped as common areas. If an association is paying property taxes, the developer likely failed to designate the subject parcels as association common areas when submitting the original development plan. Therefore, the assessor treats them as taxable parcels. To fix the oversight, they need to be remapped as common area parcels. County assessors keep these parcels on the property tax rolls but reduce the assessed valuation to $1 so that no tax bills are generated in the future. The normal process is to engage a civil engineer specializing in land surveying to revise the maps to designate the parcels as common areas. The revised maps are then submitted to the county assessor, along with a request to change the assessed value of the parcels. Recommendation: Before proceeding with a remapping process, check with the county assessor to confirm how they recognize the parcels. It could also be a simple error.
Although associations do not pay property taxes, the county tax collector can collect fees for special districts within the county. A standard cost is a sanitary district charge. There may be charges for other districts, such as vector control (mosquito abatement), library taxes, parcel taxes, and special district user fees levied by water districts. If you have questions about the charges and whether they should apply to the common area parcels, contact the tax collector's office at the phone number that appears on the tax bill.
For condominiums, section 2188.3 applies.
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with community association issues, subscribe to the Davis-Stirling Newsletter.