Here's one for your California readers. You know Proposition 13, the provision in the California Constitution that limits property tax increases, and allows reassessment of value only upon a change of ownership, and you either love it or hate it: to some it insulates property owners from being forced out of their homes by uncontrolled property taxes, to others it is responsible for the downfall of California as the Golden State.
A property owner's acquisition of replacement property for property taken in "eminent domain proceedings" in which the taken property is acquired by a "public entity," is not a "change of ownership." But what about when new property is purchased to replace property sold under threat of condemnation to a private developer who is teamed up with a government redevelopment agency -- is that a "change of ownership" such that the property is assessed at current market rates?
In Duea v. County of San Diego, No. D058333 (Cal. Ct. App. Feb. 29, 2012, published Mar. 27, 2012), the California Court of Appeal (4th District) concluded that it was. But the court's conclusion was not the result of an analysis of Prop 13, but was based on a procedural point of administrative law: the property owner did not exhaust his remedies, and the evidence before the agency supported its findings.
Duea owned San Diego property that was part of a "ballpark district" in which his property was slated for condemnation in order to build a new stadium and related development (a boutique hotel). The commercial redevelopment portion of the project would be carried out by a private developer. Adjacent properties were acquired after the City's redevelopment agency instituted condemnation proceedings, but "acquisition of [Duea's] original property by formal condemnation proceedings was either stopped or delayed as a result of a series of third-party lawsuits filed against the ballpark project." Slip op. at 4.
Duea eventually sold his property to the private developer. He then purchased replacement property, and sought to invoke Proposition 13's protection and have the base year value of his old property transferred to the new property. The parties agreed that "'the transfer of ownership of the [original] property to [the developer] was for use in connection with the Ballpark and Ancillary Projects, and that it would have condemned the property under its power of eminent domain if [Duea] had failed to execute the sale.'" Slip op. at 5. After an unsuccessful visit to the county board of euqalization, the trial court concluded the sale was a "private sale."
The court's conclusion is based entirely on its analysis that Duea did not exhaust his administrative remedies, had in effect waived his argument that the private developer was acting as an agent for the"public entity," and that he could not supplement the administrative record. Nonetheless, the opinion is worth reading. Check it out, especially if you are in California. More about the case here.
Duea v. County of San Diego, No. D058333 (Feb. 29, 2012)
