LA Mansion Tax

 In Real Estate
1. City of LA Mansion Tax Faces Legal Challenges in New Lawsuit

Equal Protection Clause of Constitution raised in complaint in case filed by Newcastle Countyards LLC v City of LA.

a. Tax is arbitrary and irrational “based on gross sales rather than net income.”
Comment: Duh! If you buy a building or a house for $10 Mill and sell it after April 1, 2023, for $10 Mill you eat it big time. You pay the city’s tax not based on profit after paying off your loan but on gross sales price. Then on top of that ridiculous outcome you pay your customary commissions and sales costs!
b. Tax treats owners differently based upon sales price received, therefore it is arbitrary!
Comment: This Ordinance was marketed and sold to the voters as a way to pay for the homeless problem and to build affordable housing without thinking that it may be illegal! Of course, it was going to pass. The majority of voters have no problem sticking it to the perceived “rich”!
2. Santa Ana’s Rent Control Ordinance Challenged in Court
Apartment Association of Orange County complaint alleges ordinance is illegal. Limits rent increases to 3% per year or <803/4 of inflation whichever is LOWER. For many years inflation was less than 2%! Ordinance also limits evictions to just cause only.
New Rent Control Board was created that governs all rents. Board stacked in favor of tenants. Contains more tenants’ rights members than those who support owners’ rights so any decision from board expected to favor tenants.
Comment: No one will want to own rental property in Santa Ana if they cannot raise rents enough to keep pace with inflation. This will limit repairs and capital improvements unless the ordinance is overturned.
3. Developers Can Bypass Zoning and Building Ordinances
Slow growth preservationists (i.e., tree huggers, Birkenstock wearers, save the whales, etc.) distressed over law allowing developers to bypass zoning and building ordinances. Great article on law in O.C. Register that allows developers to build projects despite local building laws if city has not passed state approved housing element that includes low income housing.
Most cities not in compliance (116 in Southern CA and 103 in Bay Area not compliant). The law is called Building Remedy SB 330. As a result, from Del Mar to Sylmar 26 current applications to build high-rises, mid-rises and low-rise apartments and homes that do not meet local zoning and building laws.

About the Author

  • Scott Souders
    Scott Souders Attorney & Author


Scott Souders is a real estate attorney who has practiced real estate law in excess of 45 years in Southern California. The Real Estate Law Update cites cases or statutes which are summarized and should not be relied upon without fully reading the cases or statute in the advance sheets and shepardizing the same and consulting with your own attorney.

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