Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q. Are property and transfer taxes different in Los Angeles for condos and single-family houses?
A. The short answer is no.
“The property and transfer taxes are not different in Los Angeles for condos and single-family houses,” said David Emanuel, director of luxury estates at AKG, Christie’s International Real Estate. “Taxes are the same for both types of properties.”
Real estate taxes are determined by the size, location and amenities of a residence, not whether it is a condo or single-family home.
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Owners of all residences pay the same property tax rates, although condo owners may end up paying less because condos are usually smaller than single-family homes—especially the sprawling multimillion-dollar estates that are so popular in La La Land.
One thing to note is that it is standard for sellers to pay transfer taxes on deals for single-family homes, while buyers pay them in the case of new-build condos, according to agent Michael Druker of Douglas Elliman.
“With county and city transfer taxes, or any point like that where somebody on one side has been standardized to pay something, it’s always a point on the negotiating table,” Mr. Druker said.
For a property that is seeing interest from multiple parties, a buyer offering to pay part or all of that transfer tax could be a sweetener for the seller, the agent added.
Meanwhile, Los Angeles luxury buyers are soon to be subject to a new transfer tax for homes priced at $5 million and more—a so-called mansion tax.
“This new measure, known as Measure ULA, applies to both condominium and single-family homes,” Mr. Emanuel said. “This tax is in addition to the current transfer tax, and is 4% of the sale price for homes that sell from $5 million to $10 million, then jumps to 5.5% for homes $10 million and over. This tax is applicable regardless if the property is sold at a gain or a loss.”
The tax, which goes into effect April 1, applies to homes sold in the city of Los Angeles, and not in incorporated cities such as Calabasas, Hidden Hills and Beverly Hills, Mr. Emanuel noted. In addition, the threshold will be adjusted each year based on inflation.
Although this additional levy could keep some sellers from listing their homes, Mr. Druker said he believed it will become the norm given some time, much like people have adjusted to higher mortgage rates.
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“Ultimately people sell houses, for the most part, for the traditional reasons—they need to sell because they are moving out of state or they might be getting a divorce,” he said. “If somebody needs to sell, they’re going to sell whether there’s a mansion tax or not.”