Updated on January 30, 2024
For every recorded real estate transaction in the State of California, a documentary transfer tax based on the value of the property is often imposed on documents that convey real property, unless an exemption applies.
For transactions which occur in the City of Los Angeles, there have historically been two categories of transfer taxes – one assessed by the County of Los Angeles and one assessed by the City of Los Angeles.
However, effective April 1, 2023, based on recent United to House LA (“ULA”) legislation approved by voters in November 2022, an additional tax is now imposed on property transactions where the gross sales price of the property exceeds $5,000,000, unless an exception applies.
In this post, we discuss the various categories of transfer taxes that are triggered by a recorded conveyance of real property located in the City of Los Angeles, the ULA, and exemptions to the ULA.
Previously, for properties located in the City of Los Angeles, two transfer taxes were imposed. First, when the consideration for the interest or property conveyed (exclusive of the value of any lien or encumbrance remaining thereon at the time of transfer) exceeds $100, the County of Los Angeles imposes a documentary transfer tax at the rate of $1.10 for each $1,000.00. Second, the City of Los Angeles imposes an additional transfer tax of $4.50 for each $1,000 at the effective rate of 0.45%.
However, in November 2020, voters passed Measure ULA, a so-called “LA mansion tax,” which created an additional transfer tax rate on top of the existing tax rate for sales of commercial and residential property over a certain value on or after April 1, 2023. Accordingly, effective April 1, 2023, on sales above $100 but not exceeding $5,000,000, the City of Los Angeles will assess a 0.45% transfer tax on the gross sales price or fair market value of the property (the “Base Tax”). For sale of property exceeding $5,000,000, but not exceeding $10,000,000, the City of Los Angeles imposes a 4.45% transfer tax, i.e. a premium of 4% over the Base Tax. For sale of property exceeding $10,000,000, the City of Los Angeles imposes a 5.95% transfer tax, i.e. a premium of 5.5% over the Base Tax.
Measure ULA does provide a limited number of exemptions for the ULA Tax. For example, property transfers to government agencies, nonprofit organizations, and qualified affordable housing organizations may be exempt from the ULA tax. As another example, existing exemptions for documentary transfer taxes will still apply to also exempt the ULA tax. This includes, but is not limited to, the transfer of real property within the context of a bankruptcy proceeding.
The attorneys at Schorr Law help clients to understand and effectively navigate their real estate matters including the purchase and sale of property in the county of Los Angeles. Our Los Angeles real estate attorneys have extensive experience consulting and litigating on behalf of clients. If you are a buyer or seller seeking legal assistance with the LA mansion tax or with any part of the purchase or sale of property in Los Angeles County, contact us today and schedule a consultation with one of our attorneys. Call us directly at 310-954-1877, text us at (310) 706-2265, or send us a message here.