Filed 5/23/24 Braemar Partnership v. County of San Deigo CA4/1

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COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

BRAEMAR PARTNERSHIP 9TH &

A LIMITED PARTNERSHIP,

Plaintiffs and Appellants,

v.

COUNTY OF SAN DIEGO,

Defendant and Respondent.

 D081464

 (Super. Ct. No. 37-2021-00025551-

 CU-MC-CTL)

APPEAL from a judgment of the Superior Court of San Diego County, 

Eddie C. Sturgeon, Judge. Affirmed.

Greenberg Traurig and Colin W. Fraser for Plaintiffs and Appellants.

Claudia G. Silva, County Counsel and Laura E. Dolan, Senior Deputy 

County Counsel, for Defendant and Respondent.
2

In 1978, the California electorate passed a property tax relief initiative 

in the form of Proposition 13, limiting the circumstances in which property 

could be reassessed to account for an increase in its market value. One such 

accepted circumstance was when there is a “change in ownership” of a

property. In this appeal, we must decide whether there was a “change in 

ownership” permitting reassessment when a lessor on a long-term lease died, 

resulting in a transfer of her fee interest in the property to her heirs. Under 

the plain language of the Revenue and Taxation Code, where the remaining 

term on the lease was less than 35 years at the time of the lessor’s death, the 

answer to the question is yes. We therefore affirm the judgment denying the 

lessees’ claim for a property tax refund.

FACTUAL AND PROCEDURAL BACKGROUND

The property at issue in this case is a commercial building and lots 

comprising a portion of the Catamaran Hotel on Mission Bay. For decades, 

the property has been owned by the Taylor Non-Exempt Marital Properties 

Trust (Taylor Trust) and Mission Bay Hotel Properties LP as tenants in 

common, each with a 50 percent interest. On July 1, 1985, they leased the 

subject property to Braemar Partnership and 9th & A Limited Partnership 

(collectively Braemar) for a term of 60 years, until June 30, 2045.

In March 2016, the sole beneficiary of the Taylor Trust, Mary F. Taylor, 

died. Upon her death, the beneficial ownership of the assets in the trust, 

including the subject property, transferred to her children. At that time, 

there were about 29 years remaining on the lease. 

The San Diego County Assessor’s Office (Assessor) recognized the 

transfer as a change in ownership, triggering a 50 percent reassessment 
3

of the property. The Assessor relied on Revenue and Taxation Code1 section 

61, subdivision (c)(1)(D), which states that a change in ownership occurs for 

tax purposes upon “[a]ny transfer of a lessor’s interest in taxable real 

property subject to a lease with a remaining term (including renewal options) 

of less than 35 years.” The property value was reassessed from $48,850,908 

to $51,547,928, which in turn increased the taxes owed. The Assessor sent a 

supplemental tax bill to Braemar.2

Braemar challenged the reassessment before the Assessment Appeals 

Board No. 1 (Board), arguing that when its partners signed the 60-year lease, 

it became the “owner” for property tax purposes, and remained the owner

regardless of the time left on the lease when Mary Taylor passed. Therefore, 

Braemar asserted, there was no change in ownership when Taylor’s interest 

in the property transferred to her children, so the partial reassessment and 

resulting increase in property taxes were erroneous. Following a hearing, 

the Board agreed with the Assessor that there was a change in ownership 

requiring reassessment. 

Braemar then sued the County of San Diego in superior court seeking 

a refund of the supplemental taxes paid—$7,919. Braemar maintained that 

reassessment was improper because there was no change in ownership. 

The superior court disagreed and affirmed the Board’s ruling. Braemar now

appeals. 

1 Further statutory references are to the Revenue and Taxation Code.

2 The original lease is not included in the appellate record. But it is 

undisputed that Braemar was responsible for the property taxes.
4

DISCUSSION

In this court, Braemar continues to argue there was no change in 

ownership to justify reassessment. The County responds that reassessment 

was proper under the plain language of section 61, subdivision (c)(1)(D). 

We agree with the County.

“Proposition 13, adopted in 1978, limits the amount that the assessed 

value of real property may be increased to reflect increases in the property’s 

actual market value. When ownership of the property changes, however, 

the property may be reassessed at its current market value.” (Auerbach v. 

Assessment Appeals Bd. No. 1 (2006) 39 Cal.4th 153, 157; see Cal. Const., 

art XIII A, §§ 1–2.) “Changing the assessed value of real property to its 

current market value can result in a substantial increase in the tax on that 

property. Thus, determining whether and when a change of ownership has 

occurred can have significant tax consequences.” (Auerbach, at p. 157.)

“Change in ownership” is defined in section 60. This statute effectively 

created a three-part test to determine whether a particular transaction 

resulted in a change in ownership. (Pacific Southwest Realty Co. v. County of 

Los Angeles (1991) 1 Cal.4th 155, 162 (Pacific Southwest).) To qualify as a 

change, there must be: “ ‘[1] a transfer of a present interest in real property, 

[2] including the beneficial use thereof, [3] the value of which is substantially 

equal to the value of the fee interest.’ ” (Ibid., quoting § 60.) The three 

elements of this test “are commonly referred to as ‘present interest,’ 

‘beneficial ownership,’ and ‘value equivalence.’ ” (Dyanlyn Two v. County of 

Orange (2015) 234 Cal.App.4th, 800, 809 (Dyanlyn).)

The “ ‘value equivalence’ ” element is used to determine who the 

“primary owner” is when multiple parties have an interest in one property. 

(Dyanlyn, supra, 234 Cal.App.4th at p. 810.) This simplifies the job of the 
5

assessor, who must reappraise a property only when the primary owner 

transfers their interest. (Ibid.; accord, Pacific Southwest, supra, 1 Cal.4th at 

p. 168 [“a transaction should not trigger reassessment unless it transfers the 

interest of the party carrying the primary economic weight of the property”].) 

In the context of leases—where the lessor holds a reversionary interest and 

the lessee holds a leasehold interest in the same property—sections 61 and 62 

“codify the concept that the ‘value equivalence’ element must be determined 

by reference to the lease duration.” (Dyanlyn, at pp. 810–811.)

Section 61 provides that a change in ownership includes in part:

“(A) The creation of a leasehold interest in taxable real 

property for a term of 35 years or more (including renewal 

options).

“(B) The termination of a leasehold interest in taxable real 

property which had an original term of 35 years or more 

(including renewal options).

“(C) Any transfer of a leasehold interest having a 

remaining term of 35 years or more (including renewal 

options).

“(D) Any transfer of a lessor’s interest in taxable real 

property subject to a lease with a remaining term

(including renewal options) of less than 35 years.”

(§ 61, subd. (c)(1)(A)–(D), italics added.) 

Conversely, under section 62, subdivision (g), “[a]ny transfer of a 

lessor’s interest in taxable real property subject to a lease with a remaining 

term (including renewal options) of 35 years or more” does not constitute a 

change in ownership. (Italics added.)3

3 The State Board of Equalization issued a rule mirroring sections 61 

and 62. (See Cal. Code Regs., tit. 18, § 462.100, subds. (a) & (b).)
6

As reflected across sections 61 and 62, “the creation, transfer or 

termination of a leasehold of 35 years or more should achieve a change in 

ownership because in that case the primary economic value of the land 

resides in the lease.” (Pacific Southwest, supra, 1 Cal.4th at p. 167.) 

“[S]uch leases will often confer substantial rights on the lessee, such as the 

right to develop or modify capital assets, the long-term use or uses to which 

the land is to be put, and the like.” (Id. at p. 168.) By contrast, the lessor’s 

rights are practically limited to receiving rent. (Ibid.) However, when the 

remaining term on the lease falls below 35 years, the primary economic value 

of the land shifts back to the lessor. (Dyanlyn, supra, 234 Cal.App.4th at 

p. 817.)4

“The interpretation and application of section 60 is a question of law. 

We review de novo a determination that an assessable change in ownership 

occurred under section 60.” (Reilly v. City and County of San Francisco 

(2006) 142 Cal.App.4th 480, 487.) Here, it is undisputed that Braemar

received a present interest, beneficial use, and the value equivalence of the 

subject property when its partners originally signed the 60-year lease. 

(See § 61, subd. (c)(1)(A); Dyanlyn, supra, 234 Cal.App.4th at p. 812.) It is 

4 Thirty-five years was adopted as the dividing line because financial 

institutions will lend on the security of a lease of that length or longer. 

(Dyanlyn, supra, 234 Cal.App.4th at p. 811.)
7

likewise undisputed that Mary Taylor transferred a present interest and 

beneficial ownership in the property to her children upon her death.5

The parties disagree on whether Taylor also transferred the value 

equivalence of the property at that time. This issue is resolved by the plain 

language of section 61, subdivision (c)(1)(D). Again, that provision states that 

any transfer of a lessor’s interest in real property “subject to a lease with a 

remaining term”—not original term—“of less than 35 years” constitutes a 

change in ownership. (Ibid., italics added.) Here, it is settled that when 

Taylor’s interest transferred to her children, there were 29 years left on the 

lease. Thus, the Assessor, the Board, and the superior court all correctly 

determined there was a change in ownership.

Resisting this simple conclusion, Braemar argues that when it entered 

into the 60-year lease, it obtained the value equivalence of the property and 

never lost it, despite the passage of time, so the value equivalence could not 

have transferred to the children. For this argument, Braemar relies on select 

passages from Dyanlyn, supra, 234 Cal.App.4th 800. However, Dyanlyn 

involved a complex transaction that is quite different from the transfer in 

this case. Read in its entirety, it is clear Dyanlyn does not affect the outcome

here.

In Dyanlyn, a retail shopping center was subject to a 60-year ground 

lease. When there were about 30 years remaining on the lease, the lessor

and lessee agreed to extend the lease by 15 years. A few weeks later, the 

5 In its reply brief, Braemar cursorily argues that the transfer did not 

satisfy all three section 60 elements because Braemar captured all three 

elements when the lease was created. As a matter of fairness, we will not 

consider arguments raised for the first time on reply. (People v. Tully (2012) 

54 Cal.4th 952, 1075.) In any event, Braemar wrongly assume there cannot 

be multiple present interests and beneficial uses in a leased property. (See, 

e.g., Pacific Southwest, supra, 1 Cal.4th at pp. 162–164.)
8

lessor sold the property to the long-term lessee and a third-party investor

(collectively Dyanlyn). The county reassessed the property after the sale. 

Dyanlyn challenged the reassessment, arguing there was no change of 

ownership for property tax purposes. (Dyanlyn, supra, 234 Cal.App.4th at 

pp. 804–805.) Division Three of this court examined each step of this twostep transaction separately and then collectively to decide whether it was 

“a sham to avoid reassessment of property taxes.” (Id. at pp. 817–818.)

Considering the first step, the court observed there were no provisions 

in sections 61 or 62, nor in the property tax rules (Cal. Code Regs., tit. 18, 

§ 460 et seq.), discussing lease extensions. (Dyanlyn, supra, 234 Cal.App.4th 

at p. 813.) The court therefore turned to annotations and advisory opinions

from the State Board of Equalization (BOE) for guidance. (Id. at pp. 813–

814.) As Dyanlyn discussed, the BOE has opined that in an “over/under/over” 

lease extension scenario—where a lease was originally over 35 years, fell

under 35 years due to time passing, then rose over 35 years based on a lease

extension—there is no change in ownership. (Id. at p. 817, citing Board’s 

Advisory Opinion (No. 09013291), dated May 27, 20096 (Advisory Opinion).) 

6 The Advisory Opinion is included in the appellate record. It is also 

available online. (See Matthew F. Burke, Tax Counsel for Bd. of 

Equalization, letter to Chief Dean Kinnee, Assessed Properties Division, 

dated May 27, 2009, <https://www.boe.ca.gov/proptaxes/pdf/220_0357.pdf> 

[as of May 23, 2024], archived at http://perma.cc/9GMX-XK5C (click “view the 

live page”).)
9

The BOE reasoned:

“When the lease was first entered into, the lessee obtained 

a present interest and the beneficial use, and while the 

leasehold term is 35 years or longer, the lessee has the 

value equivalence. Thus, the lessee has become the owner 

of the leased premises for property tax purposes. Once the 

leasehold term drops below 35 years, the value equivalence 

shifts to the lessor; however, we have consistently taken 

the position that when a long-term lease for 35 years or 

longer drops down to a term of less than 35 years through 

the mere passage of time, although the value equivalence 

shifts from the lessee to the lessor, there is no change in 

ownership. This is because the lessor does not become the 

‘owner’ of the leased premises for property tax purposes. 

When the lease drops down to a term of less than 35 years 

through mere passage of time and only the value 

equivalence shifts to the lessor, the lessee remains the 

owner for property tax purposes and, in our opinion, will 

continue to be the owner for property tax purposes unless 

and until the lease expires or the lessor otherwise transfers 

its underlying fee interest in the property.

“If the lessor and lessee subsequently enter into a lease 

extension at any time while the remaining leasehold period 

is under 35 years, the value equivalence once again 

transfers to the lessee. However, the lessee has at all times 

retained a present interest in and the beneficial use of the 

property upon which a change in ownership has already 

been made, and which made the lessee the owner for 

property tax purposes. A present interest in and the 

beneficial use of the property were transferred to the lessee 

at the beginning of the lease, and have remained with the 

lessee at all times. Thus, no change in ownership occurs.” 

(Advisory Opinion, supra, at pp. 5–6, fn. omitted, italics 

added.) 

The Dyanlyn court agreed with this analysis and therefore found no 

change in ownership when the lessor and lessee extended their lease. 

(Dyanlyn, supra, 234 Cal.App.4th at p. 817.) The lessee captured a present 
10

interest, beneficial use, and the value equivalence of the property when the 

parties signed the 60-year lease. Although the value equivalence returned to 

the lessor as the years passed, the lessee regained the value equivalence 

when they extended the lease to about 45 years. But because there was no 

“correlative transfer of the present interest and beneficial use” at that point, 

there was no change in ownership. (Advisory Opinion, supra, at p. 6; see 

Dyanlyn, at pp. 804–805, 817.)

The second step of the transaction involved a straightforward 

application of section 62, subdivision (g), which (as indicated above) provides

that any transfer of a lessor’s interest in property subject to a lease with a 

remaining term of 35 years or more does not constitute a change in 

ownership. Since the lease extension brought the remaining term of the lease 

to about 45 years, the sale of the property from the lessor to Dyanlyn was 

excluded from reassessment. (Dyanlyn, supra, 234 Cal.App.4th at p. 817.)

Even if the parties in Dyanlyn had not entered into the lease extension, 

and the lessor sold the property while the remaining term was below 35 

years, the court opined there would still be no change in ownership under the 

logic of the “over/under/over” lease extension analysis. (Dyanlyn, supra, 234 

Cal.App.4th at p. 814.) Still, the lessee would capture all three elements

upon signing the 60-year lease. The value equivalence element would shift

back to the lessor over time, but the long-term lessee would gain the fee value

upon purchasing the property. In both scenarios, “ ‘the lessee remains the 

primary economic owner before and after the transactions’ ” and “ ‘at all 

times retained a present interest in and the beneficial use of the property’ ” 

so there would be no change in ownership prompting reassessment. (Id. at 

p. 817.)
11

Significantly, Dyanlyn distinguished our situation—the lessor’s 

transfer to a third party as opposed to a long-term lessee. (Dyanlyn, supra, 

234 Cal.App.4th at pp. 816–817.) The court found the rule that a change of 

ownership occurs anytime a lessor transfers their interest in property subject 

to a lease with a remaining term of less than 35 years problematic only in the 

latter type of transfer. (Id. at p. 817 [“the rule as stated would not apply in 

an ‘over, under’ lease situation when there is a transfer of a lessor’s interest 

in taxable real property to the long-term lessee” (italics added)].) 

Dyanlyn does not apply to this case, which does not involve a lease 

extension and/or sale to a lessee. Unlike those transactions, Braemar did not 

end up with the value equivalence after the transfer in this case. The lessors

regained the value equivalence when the remaining term on the lease fell 

below 35 years, and upon Mary Taylor’s death that value equivalence

transferred to her children, not to Braemar. This resulted in a change of

ownership within the plain language of section 61, subdivision (c)(1)(D). 

(Cf. Advisory Opinion, supra, at p. 6, fn. 6 [“if a 40-year lease were to drop to 

30 years through mere passage of time, a transfer by the lessor of its fee 

interest in the property subject to the 30-year lease results in a change in 

ownership”].) As the BOE indicated, Braemar remained the “owner” of the 

property for tax purposes—even after their lease term fell below 35 years and 

the value equivalence returned to the lessors—until Taylor transferred her 

interest in the property. (See Advisory Opinion, p. 6.) At that point, all three 

section 60 elements were transferred to her children, triggering 

reassessment.

The Second Appellate District, Division One recently rejected a similar 

argument in Equinix LLC v. County of Los Angeles (May 9, 2024, B324243) __ 

Cal.App.5th __ (Equinix). In that case, the appellants leased a property for a 
12

term of 20 years with three 5-year options. (Id. at p. *3.) When there were 

about 26 years left on the lease, the lessor sold its interest in the property. 

(Id. at pp. *1–*2.) In holding that the sale constituted a change in ownership, 

the Court of Appeal disagreed with appellants that they became the “primary 

owner” of the property when they entered into the long-term lease and

remained the primary owner despite the sale. (Id. at pp. *10–*11.) The court 

saw nothing in the statutory scheme suggesting that appellants continued to 

hold the value equivalence once the lease term fell below 35 years. (Id. at 

p. *13.) “To the contrary, by enacting [section 61, subdivision (c)(1)(D)], the 

Legislature rejected” that very approach. (Equinix, at p. *13.) The court 

likewise found appellants’ reliance on Dyanlyn misplaced, as Dyanlyn “says 

nothing about” a situation where “the remaining lease term was less than 

35 years at the time of the sale, and the sale was not to the lessee but a third 

party.” (Equinix, at p. *14.)

Finally, to the extent Braemar emphasizes that it must bear the tax 

increase even though it had no control over the transfer, we suspect the 

parties could have addressed this issue in the original lease. (See, e.g.,

Equinix, supra, __ Cal.App.5th at p. *19 [“a long-term lessee can negotiate 

the responsibility for payment of any property tax increase resulting from a 

change in ownership during the lease”].) In any event, this is not a reason to 

ignore the clear language of section 61, subdivision (c)(1)(D). (Coalition of 

Concerned Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 

737 [“If the language is clear, courts must generally follow its plain 

meaning”].)
13

DISPOSITION

The judgment is affirmed. The County is entitled to costs on appeal.

DATO, J.

WE CONCUR:

McCONNELL, P. J.

O’ROURKE, J.