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Volume XIII, Number 27

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Measure ULA – An Additional Transfer Tax on Real Estate Transfers

Measure ULA, also known as the Homelessness and Housing Solutions Tax (HHS Tax), and usually referred to as a "mansion tax," has been approved by voters. The measure creates a new tax on certain property transfers in the city of Los Angeles.

What Real Estate Professionals Need to Know

  • The tax applies to both residential and commercial real property sales valued over $5 million.

  • The tax is an additional transfer tax and does not replace nor modify the existing LA County and LA City transfer taxes.

  • The HHS Tax will apply a tax rate of 4 percent to properties sold for $5 million or more but less than $10 million, and a 5.5 percent rate to properties sold for $10 million or more.

  • The HHS Tax applies to the gross sale value and there is no reduction for existing debt at the time of sale, which is not the case in respect of the normal transfer tax. For example, if a property with a $5 million outstanding mortgage sells for $6 million, the HHS Tax will be $240,000 (4 percent x $6 million). If a property with a $20 million mortgage is sold for $20 million, the HHS Tax will be $1.1 million (5.5 percent x $20 million).

  • The HHS Tax takes effect on April 1, 2023 and will apply to property transfers on or after that date.

  • The HHS Tax thresholds of $5 million and $10 million will be adjusted for inflation each year.

  • Property transfers with “qualified affordable housing organization” transferees, certain nonprofit transferees and governmental transferees will be exempt from this tax.

What Must Be Determined

  • Whether transfers of interests in legal entities that result in a change of ownership in real property will trigger the HHS Tax.

  • Whether the California transfer tax statutory exemptions will apply to the HHS Tax (for example, in foreclosure sales).

  • How the tax will be applied to real property transfers involving separate real property interests; in other words, will sales of multiple properties in a series of transactions be aggregated to determine achieving the threshold levels?

  • What will become the established custom as to who pays: the buyer, the seller, or both will split the tax.

Ian Kirk, a Real Estate associate and candidate for admission to the California State Bar, contributed to this advisory.

©2023 Katten Muchin Rosenman LLPNational Law Review, Volume XII, Number 336
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About this Author

Christine N. Fitzgerald, Katten Muchin Law Firm, Real Estate Legal Specialist
Partner

Christine N. Fitzgerald is co-head of Katten’s Los Angeles Real Estate practice. She practices in transactional real estate law, including all aspects of real estate financing, acquisitions and dispositions and development. She concentrates her practice in real estate finance and is experienced in secured, mezzanine and construction lending and borrowing, securitized lending, inter-creditor arrangements, participations, whole and portfolio loan sales, workouts, foreclosures, loan restructurings and deeds-in-lieu of foreclosure, as well as acquisition, disposition and...

310-788-4459
Benzion J. Westreich, transactional real estate lawyer, Katten Muchin Law Firm
Partner

Benny Westreich’s practice covers the full range of transactional real estate, representing institutional and individual clients in the United States and abroad in the acquisition, development, financing, construction, renovation, leasing, management and disposition of commercial and residential properties (including hotel, retail, office and multi-use projects).

Benny focuses a lot of his practice on structuring real estate funds and joint venture (including participation structures). He counsels clients on both sides of...

310-788-4409
Adam Engel, real estate financial lawyer, Katten Muchin Rosenman
Partner

Adam J. Engel concentrates his practice in real estate finance, development, acquisition and disposition matters. He assists both lenders and borrowers with the origination, structuring, restructuring and execution of a wide range of real estate financing transactions, including first lien and subordinate mortgage financing, construction financing, mezzanine financing, loan participation, preferred equity and joint venture transactions and other secured and unsecured lending structures. Additionally, Adam assists clients with a variety of development, acquisition,...

310-788-4592
Alec Nedelman Real Estate Attorney
Senior Counsel, Business & Talent Development

Alec Nedelman has been a trusted advisor and counselor to real estate clients and companies, providing them with the critical thinking needed to reason through unexpected issues and opportunities. He helps clients analyze, structure, negotiate and implement complex commercial real estate transactions, including loan originations, ground leases and workouts and restructurings.

By combining recognized negotiating skills, marketing acumen and practical business skills with legal analysis and experience, Alec assists in solving high-impact business...

310-788-4533
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