In April of 2023, a Los Angeles real estate levy pertaining to a sale and transfer tax applied to properties valued over $5 million will take effect. Although commercial real estate developers in San Diego and Orange County may not immediately be concerned about a levy that specifically applies to Los Angeles County, the ripple effect of this levy is likely to be felt all over Southern California.
The levy is referred to as Proposition ULA. ULA stands for “United to House L.A.” because the financial benefits from this massive tax increase for certain projects will be used – in part – to fund opportunities designed to combat homelessness. When the measure passed on Election Day 2022, it received support from nearly 60% of voters.
When the measure takes effect in April, the commercial tax rate applied to commercial and residential sales and transfers totaling between $5-10 million will jump from 0.45% to 4%. Transactions involving property valued over $10 million will be taxed at a 5.5% rate. Understandably, many developers are concerned that this turn of events will slow investment in the Los Angeles market in significant ways.
The benefits of a proactive approach
By staying informed about the ever-evolving nature of both state and local commercial real estate regulations, commercial real estate developers can make far more informed decisions about potential transactions and general opportunities than they otherwise might.
If the thought of reading regulatory news and dissecting how it could impact your goals and operations sounds exhausting, don’t forget that you can seek professional guidance on a proactive basis. All too often, developers only seek such assistance once they’re in legal trouble. Reaching out proactively can prevent liability concerns and financial burdens from developing in the first place.