Measure ULA has passed. It is called the "Mansion Tax" as it affects properties, residential or commerical, valued at more than $5M.
Here's what you need to know:
Beginning March 1, 2023, for City of Santa Monica property owners and April 1, 2023 for City of Los Angeles property owners, two new tax measures will have a significant impact on all Real Estate transactions valued at $5 million and above. Please take a quick moment to read the following information regarding these tax measures, which both passed during the most recent election in November. If you've considered selling and your property is valued at more than $5M, you might want to consider selling before these dates.
Measure ULA, a new tax law specific to the city of Los Angeles, will take effect on April 1st, 2023:
Properties sold at $5 million or above will incur a total transfer tax of 4.6% (additional 4% tax), and properties sold at $10 million or above will be taxed a total 5.7% (increase of 5.5%).
Measure GS, a tax law specific to the city of Santa Monica, will take effect on March 1st, 2023:
Properties sold at $8 million or above will be taxed a total of 5.7% (an 833% increase).
This tax is on the sales price, so it doesn't matter what you paid for it. For example, say you bought a multifamily building for $2M ten years ago. It's now worth $6M. If you sell after the measure takes effect, you'll now be paying an extra $276K. Yikes. Let's say it's worth $11M now. If you sold for that price, you'd pay $627K. Double yikes.
This applies to both residential and commercial real estate, but incorporated cities such as Beverly Hills and Malibu are not included. At the point of sale, the one-time tax will be deducted through escrow, regardless of whether the seller is taking a loss on the property or not.
For small landlords whose livelihoods depend on their apartment buildings, this is harsh.
