Legal Question in Real Estate Law in California

Well, 2007 was ten years ago, so there could be ten successive 1% increases, which if compounded would come to about 11%. 11% of $579K is about $64K. $579K + $64K is almost $643K. So, it seems to me that $635K is well within the lawful range. Am I missing something?

Both you and Mr. Whipple have the right idea, but are somewhat confused about how Prop 13 works. Prop 13 capped both tax rates and assessed values, which are two related but very different things. The 1% rule is a limit on the base tax RATE counties may charge (absent voter approved special assessments). So the county cannot charge a base tax RATE more than 1% of the CURRENT assessed value. Your issue is with the assessed value, not the rate. So the 1% rule does not apply; a different one does.

As Mr. Whipple correctly notes, under Prop 13 the assessed value can change. The county can reassess annually or less often, or at any time on request of the property owner. However, Prop 13 put a 2% per year cap on increases to the assessed value for tax purposes, regardless of market value. The law calls that 2% adjusted value the "factored base value." So the assessed value must be the lesser of the market value OR the factored base value.

There are exceptions when property changes hands, major improvements are made, or certain other triggers for reassessment to full market value occur. But so as long as you own a property and don't trigger a full reassessment, the maximum assessed value for any given tax year is the base value, increased by 2% per year, compounded, for each year since you acquired the property, or the market value, whichever is less.

With an initial value of $597,00 ten years ago, the Prop 13 cap on the assessed value of your property this year actually would be $691,599. So it sounds like your assessed value is based on the Count Assessor's determination of the market value, not the factored base value. Next year the factored base value cap will be $705,798 and in five years it will be $763,978. As long as your market value remains less than that cap, you will be taxed on each year's market value.

However, you also need to bear in mind that in any given year, if your property increases in value by more than 2%, the county can bump your assessed value up to either the market value or that year's "factored base value," whichever is less. Since your market value is substantially below the factored base value, if your property increased in value by, say, 5% in a particular year, the county could reassess you for the full 5% increase.