Court Opinion

ID: 9912231
Source: CourtListenerOpinion
Date Created: 2023-12-21 21:02:01.481765+00
Date Added: 2024-06-11T12:58:12.464943
License: Public Domain

Filed 12/21/23
                 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                 SECOND APPELLATE DISTRICT

                         DIVISION FOUR

YAAKOV and SARAH                      B323864
GREENSPAN, Individually and as       (Los Angeles County
Cotrustees of the GREENSPAN          Super. Ct. No.19STCP03626)
FAMILY TRUST,

       Plaintiffs and Appellants,

       v.

COUNTY OF LOS ANGELES et
al.,

       Defendants and
       Respondents.

     APPEAL from a judgment of the Superior Court of
Los Angeles County, David Sotelo, Judge. Reversed and
remanded, with directions.
     Westland Real Estate Group, Asher B. Fried, and Bashir
Eustache, for Plaintiffs and Appellants.
     Dawyn R. Harrison, County Counsel, and Drew M. Taylor,
Deputy County Counsel, for Defendants and Respondents.

                  ____________________________

       Proposition 13, adopted by voters in 1978, amended
California’s Constitution to limit real property taxes to 1 percent
of a property’s base-year value, with an annual 2 percent cap for
inflation. A property’s base-year value may be reestablished only
upon purchase, new construction, or a change in ownership. In
addition, the assessed value of the property must be allocated
between land and improvements.
       In April 2014, appellants Yaakov and Sarah Greenspan
purchased a 2,400-square-foot home in Long Beach for $900,000.
The County of Los Angeles (County) appraised the property with
a new base-year value of $900,000, allocating $540,000 to the
land and $360,000 to the improvements. In 2016, the
Greenspans demolished the original residence, except the garage,
and built a new single-family home on the property.
       Under Revenue and Taxation Code sections 51 and 75.10,1
the value of any structure removed by a homeowner is to be
deducted from the prior base-year value. Once new construction
is completed, the value of the new construction is appraised and
assigned a new base-year value going forward, which is then
added to the existing base-year value allocated to the land.
       This is not what occurred in this case. Instead, the Los
Angeles County Assessor (Assessor) took the value of the

1     All further statutory references are to the Revenue and Taxation
Code unless otherwise specified.

                                  2
structure demolished ($320,000) and reallocated that entire
amount to the land portion of the purchase price, leaving a
$40,000 “credit” for the remaining garage. This resulted in a new
allocation of the original purchase price of $860,000 to land and
$40,000 to improvements. The Assessor then separately
appraised the value of the new construction at $1,183,130 and
added this amount to the reallocated land and improvements.
       The County’s justification for the failure to give the
Greenspans credit for the demolished residence was a policy
allowing an assessor to reallocate to land any portion of the
property substantially renovated within two years of the
purchase date on the assumption the owner purchased the
property for land value alone. The County argues that it can do
this because section 51.5 allows for the correction of any errors or
omissions made in the original determination of the base-year
value.
       The Greenspans filed separate applications to the Los
Angeles County Assessment Appeals Board (Board) challenging
(1) the County’s reallocation of their original purchase to
primarily land as a practice contrary to statutory law, and (2) the
County’s valuation of their new construction as excessive. After
prevailing on their new construction challenge, the Greenspans
filed suit against the County in superior court challenging the
Board’s denial of their reallocation appeal and seeking repayment
for any taxes overpaid. The trial court denied relief and entered
judgment in favor of the County. On appeal, the Greenspans
contend, and we agree, that the County’s reallocation of their
base-year land and improvement value was contrary to statutory
law. The Assessor’s automatic reallocation of the base-year value
for the entire structure removed (with “credit” for the remaining

                                 3
garage) cannot be squared with sections 51 and 75.10, which
command that a property owner receive a reduction in previously
assessed base values for portions of any property removed. To
the extent section 51.5 allows for error correction, that statute
was enacted with an extensive legislative declaration stating any
such corrections must be consistent with Proposition 13 and
existing statutory valuation standards. In light of this statutory
scheme, the Board’s denial of the Greenspans’ allocation appeal
was legal error subject to our judicial correction.
       We therefore reverse the trial court’s judgment and direct
the trial court to enter a new judgment vacating the decision of
the Board and remanding the matter for further proceedings
consistent with this opinion.

       FACTUAL AND PROCEDURAL BACKGROUND
A.     The Framework for Tax Refunds
       When a taxpayer seeks to challenge the assessment of its
property, it may petition the Board for a reduction. (Fisher v.
County of Orange (2022) 82 Cal.App.5th 39, 51 (Fisher).)
“‘Although a local assessment appeals board decision arises from
an administrative hearing process, the mechanism for seeking
judicial review of the decision is “‘significantly different from that
of other administrative agency decisions. Ordinarily, the
aggrieved taxpayer’s remedy is not to seek administrative
mandate pursuant to Code of Civil Procedure section 1094.5, but
to pay the tax and file suit in superior court for a refund.’”’”
(Ibid.; accord, William Jefferson & Co., Inc. v. Orange County
Assessment Appeals Bd. No. 2 (2014) 228 Cal.App.4th 1, 10–11
(William Jefferson).)

                                  4
B.      Property Purchase and Initial Assessment in
        2014
        On March 20, 2014, the Greenspans purchased a home on
Locust Avenue in Long Beach, California for $900,000.2 The
change in ownership triggered a reassessment of the property.
The Assessor appraised the property with a new base-year value
(i.e., total taxable value) of $900,000, the purchase price, and
allocated that value as follows: $540,000 for the land and
$360,000 for the improvements on the property.
        In February 2016, the Greenspans started a substantial
renovation of their property, which was completed on
December 28, 2016. The Greenspans assert that they initially
did not intend to remove the original residence but found it was
necessary to do so once renovation was underway. They
ultimately demolished the original residence, except the garage,
and built a new single-family residence on the property.

C.    Reallocation of 2014 Base-Year Values
      In 2017, based on the Greenspans’ demolition of the
original residence, the Assessor modified the 2014 base-year
value of the property, allocating more of the purchase price to the
land than to the improvements that were on it. While the
improvements were initially assessed at $360,000, the Assessor
reduced that to $40,000 in recognition that only the original
garage remained. This resulted in a base-year land value of
$860,000, with $40,000 in remaining improvements.

2      On February 13, 2017, appellants transferred the property to
themselves as cotrustees of the Greenspan Family Trust, a revocable
living trust.

                                  5
       The County then issued “an adjusted property tax bill” for
the 2016–2017 roll year. Prior to the adjustment, the 2016–2017
base value for the property was a total of $931,979, with an
allocation of $559,188 to land and $372,791 to improvements.3
After modification, the total value was $931,980, with $890,559
allocated to land and $41,421 allocated to improvements.4
       In an email exchange with the Assessor’s office, the
Greenspans asked why they did not “get credit for the old house.”
The Appraiser responded, “[W]e look at when you purchased the
property and when you requested the permit to demolish. The
purchased [sic] date we have is [April 29, 2014,] and the permit to
demolish the property was requested on [January 19, 2016,] and
the permit to build was requested on [February 5, 2016].
Unfortunately it did not go beyond the two years.” After the
Greenspans asked the County’s appraiser “to send . . . the code
that references the [two-year] requirement,” he responded that
“[t]he [Revenue and Tax] code that allows us to reallocate the
value from the improvement to land can be found on the [Board
of Equalization] website . . . section 51.5b.” He added, “[T]o be
exact[,] the portion of the garage that was not demolished was
given as credit.”

3     This amount reflects the initial purchase price allocations, plus
any standard inflationary increases permitted by Proposition 13.

4      We observe that although this base value is $1 higher than the
prior total base value, neither party attaches any significance to this
$1 difference.

                                   6
D.      Appraisal of the Newly Constructed Residence
        In 2017, the Assessor also appraised the new residence the
Greenspans constructed and issued a “supplemental property tax
bill” for the 2016–2017 roll year. The notice reflected a “net
assessed value” of $1,183,130 due to the “completion of new
construction occurring [December 28, 2016].” The Assessor
valued the new construction at $1,183,130, estimating the costs
of the various improvements added to the property by the new
construction. This amount was then added to the previously
reallocated land value of $890,559 and improvements of $41,421,
for a total sum value of $2,115,110.

E.    The Appeal Before the Board
      The Greenspans separately appealed (1) the Assessor’s
modification of the initial base-year allocations between land and
improvements, and (2) the supplemental assessment of the new
construction completed on December 28, 2016. The Greenspans
argued (1) the method used by the County in 2017 to
retroactively reallocate the 2014 value of their original purchase
between the land and improvements was based on an improper
presumption and contrary to statutory law, and (2) the value the
County assigned to their newly renovated home was excessive.
      In their applications, the Greenspans set out their
challenges to the valuation numbers as follows:

4. Value                      A. Value on Roll   B. Applicant’s
                                                 Opinion of Value
Land                          $890,559           $559,188
Improvements/Structures       $1,224,551         $1,041,421
TOTAL                         $2,115,110         $1,600,609

                                7
      At an initial hearing on January 31, 2018, a Los Angeles
County Assessment Hearing Officer agreed with the Greenspans’
position in both appeals. The hearing officer recommended to the
Board that the value of the property be allocated between the
land and improvements according to the values the Greenspans
assigned to them in their applications for relief.
      The Assessor rebutted the hearing officer’s
recommendation, and a hearing before the Board was set for
February 22, 2019. At the hearing, the County presented new
pre-construction and post-construction appraisal reports bearing
the dates February 5 and February 21, 2019, respectively. The
pre-construction appraisal compared the property to three
smaller vacant-land lots and valued the property as if it were
vacant land on December 28, 2016. The post-construction
appraisal valued the property with the new construction
completed as of December 28, 2016, and recommended a
reduction in value from $1,183,130 to $963,350 for the new
construction.
      On February 28, 2019, the Board issued its decision in both
appeals.5 The Board denied that the value of the property had
been incorrectly allocated between land and improvements.
However, the Board recommended the value of the post-
construction improvements be reduced. In reaching its decision,
the Board set out the final valuation numbers as follows:

5    The Greenspans did not request findings of fact from the Board.

                                 8
                 Prior Tax Value       Board Found     Net Change in
                                       Value           Value
Land             $890,559.00           $890,559.00     $0.00
Improvements     $1,224,551.00         $1,004,771.00   ($219,780.00)
Taxable Value    $2,115,110.00         $1,895,330.00   ($219,780.00)

F.    The Trial Court Refund Action
      On September 27, 2019, the Greenspans filed their first
amended complaint (FAC), the operative pleading in the trial
court. The FAC sought a refund of any excess taxes paid based
on the reallocation of improvements to land that occurred as of
2016. In the alternative, the complaint sought an order
remanding the matter to the Board for reconsideration of the
2016 assessment that did not utilize the reallocation practice that
the Assessor had employed previously.
      On April 8, 2022, the trial court ruled in favor of the
County. It entered judgment on June 15, 2022. The Greenspans
timely appealed.

                          DISCUSSION
A.    Standards of Review
      The Board’s “‘“‘factual determinations are entitled on
appeal to the same deference due a judicial decision, i.e., review
under the substantial evidence standard.’ [Citation.]” [Citation.]
When the assessment appeals board decides a question of law,
such as the interpretation of a statute, courts are authorized to
conduct an independent reassessment.’” (Fisher, supra, 82
Cal.App.5th at p. 51; accord, Manson Construction Co. v. County
of Contra Costa (2020) 56 Cal.App.5th 1079, 1087.)
      When interpreting a statute, “our core task . . . is to
determine and give effect to the Legislature’s underlying purpose

                                   9
in enacting the statutes at issue.” (McHugh v. Protective Life Ins.
Co. (2021) 12 Cal.5th 213, 227; accord, Jarman v. HCR
ManorCare, Inc. (2020) 10 Cal.5th 375, 381.) “We first consider
the words of the statutes, as statutory language is generally the
most reliable indicator of legislation’s intended purpose.
[Citation.] We consider the ordinary meaning of the relevant
terms, related provisions, terms used in other parts of the
statute, and the structure of the statutory scheme.” (McHugh,
supra, at p. 227; accord, Jarman, supra, at p. 381.)

B.     Agency Rules, Handbooks, and Annotations
       Pursuant to Government Code section 15606,
subdivision (c), the State Board of Equalization (SBE) has
promulgated regulations that are referred to as the “Property Tax
Rules” and are located at Title 18, Public Revenues, Chapter 1 of
the California Code of Regulations. The Property Tax Rules
“have the force and effect of law.” (Prudential Ins. Co. v. City and
County of San Francisco (1987) 191 Cal.App.3d 1142, 1152.)
       The SBE has also issued handbooks for use by assessors
throughout the state. (Torres v. San Francisco Assessment
Appeals Bd. No. 1 (2023) 89 Cal.App.5th 894, 899–900 (Torres).)
“‘“Although assessors’ handbooks are not regulations and do not
possess the force of law, they . . . have been relied upon and
accorded great weight in interpreting valuation questions.”’” (Id.
at p. 900; Sky River LLC v. County of Kern (2013) 214
Cal.App.4th 720, 735–736.)
       Finally, the SBE periodically publishes non-binding,
advisory “Annotations” on its website. (Cal. Code Regs., tit. 18,
§ 5700.) According to the SBE, these Annotations “are a research
tool” and contain its counsel’s opinions regarding “the application

                                10
of the statutory law, regulatory law, or judicial opinions to a
particular factual circumstance.” (Id., tit. 18, § 5700, subd. (c);
Phillis v. County of Humboldt (2020) 59 Cal.App.5th 432, 443
(Humboldt).)
       Where the SBE has not adopted a formal rule or regulation
concerning a particular tax issue, its interpretation of the
statutes and existing regulations in assessing taxes due is subject
to broad judicial review. (See Wallace Berrie & Co. v. State Bd. of
Equalization (1985) 40 Cal.3d 60, 65; see also Yamaha Corp. of
America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 11
[“Unlike quasi-legislative rules, an agency’s interpretation does
not implicate the exercise of a delegated lawmaking power;
instead, it represents the agency’s view of the statute’s legal
meaning and effect, questions lying within the constitutional
domain of the courts”]; see also Farmers Ins. Exchange v.
Superior Court (2006) 137 Cal.App.4th 842, 859 [observing that
“[a]n agency’s ad hoc assertion of a statutory interpretation in a
particular matter or in the course of litigation . . . does not
engender the same degree of respect”].)6

6     We take judicial notice of the Assessor’s Handbook and SBE
Annotations. (County of San Diego v. Assessment Appeals Bd. No. 2
(1983) 140 Cal.App.3d 52, 59; Hunt-Wesson Foods, Inc. v. County of
Alameda (1974) 41 Cal.App.3d 163, 180; see Fisher, supra, 82
Cal.App.5th at pp. 48–49; Evid. Code, §§ 452, subd. (c) [judicial notice
may be taken of “[o]fficial acts of the legislative, executive, and judicial
departments of . . . any state of the United States”], 459, subd. (a); cf.
Humboldt, supra, 59 Cal.App.5th at p. 437 [discussing various
annotations].)

                                    11
C.     Proposition 13 and New Construction
       1.    Proposition 13
       “In California all real property and business personal
property is taxable ‘in proportion to its full value’ unless
specifically exempted. (Cal. Const., art. XIII, § 1, subd. (b).)”
(County of Los Angeles v. Raytheon Co. (2008) 159 Cal.App.4th
27, 34.) “In 1978, Proposition 13 amended the California
Constitution to limit real property taxes to 1 percent of a
property’s base[-]year value adjusted annually by an inflation
factor not to exceed 2 percent of the prior year’s value. (Cal.
Const., art. XIII A, §§ 1, subd. (a), 2, subd. (b); [citations].)” “A
property’s base[-]year value may be reestablished only if the
property is purchased, is newly constructed, or there is a change
in ownership.” (William Jefferson, supra, 228 Cal.App.4th at
p. 9; see Fisher, supra, 82 Cal.App.5th at p. 49; §§ 110.1, subd. (f),
51, subd. (a); Cal. Code Regs., tit. 18, § 460, subd. (b)(5).) “Land
and improvements shall be separately assessed.” (§ 607; Cal.
Const., art. XIII, § 13.)
       The purchase price is rebuttably presumed to be the “full
cash value” or “fair market value” if the terms of the transaction
were negotiated at arm’s length in an open market. (§ 110,
subd. (b).) Thereafter, entries onto the assessment roles are
generally “‘“done pro forma without the need to exercise one’s
judgment as to value, simply by applying an inflation factor to
the previous year’s entry.”’” (Little v. Los Angeles County
Assessment Appeals Bds. (2007) 155 Cal.App.4th 915, 918, fn. 1,
internal citations omitted.)
       In the case of new construction, “additions, alterations, or
other changes to existing property may trigger a partial
reassessment under Proposition 13, such that a new base[-]year

                                 12
value will be established for the newly constructed portion of the
property.” (Wunderlich v. County of Santa Cruz (2009) 178
Cal.App.4th 680, 690 (Wunderlich)); § 71; Cal. Code Regs., tit. 18,
§ 463, subd. (a).)7

      2.      Statutory Valuation of New Construction
      The valuation of new construction is addressed by several
sections of the Revenue and Taxation Code. (See generally Pope
v. State Bd. of Equalization (1983) 146 Cal.App.3d 1132, 1135–
1136 (Pope) [observing the Legislature passed legislation to
address concept of “newly constructed property” after voters
adopted Proposition 13].)
      First, under section 51, if a portion of real property has
been destroyed or removed, including “by voluntary action by the
taxpayer,” the base-year value of the property going forward
“does not include that portion of the previous base[-]year
value . . . that was attributable to any portion of the property that
has been destroyed or removed.” (§ 51, subds. (b), (b)(2), italics
added.)
      Second, under section 75.10, subdivision (a), an assessor
must appraise construction at its full value on the date that it is
completed and determine a new base-year value for the value of

7      In 1983, the Legislature added various provisions to ensure that
adjustments in assessed value were made as of the date a new event
occurs (i.e., completion of new construction or change in ownership).
These provisions were intended to eliminate any delay between
valuation and reassessment and promote equity among taxpayers.
(Chevron USA, Inc. v. County of Kern (2014) 230 Cal.App.4th 1315;
Shafer v. State Bd. of Equalization (1985) 174 Cal.App.3d 423, 426;
Stats. 1983, ch. 498, § 133; §§ 71, 75, 75.10.)

                                  13
the new construction—“except as provided in . . . subdivision (b).”
(§ 75.10, subd. (a).) Under subdivision (b), “the removal of a
structure from land” qualifies as its own “new construction” event
but requires that “the new base[-]year value of the remaining
property (after removal of the structure) shall be determined in
the same manner as provided in subdivision (b) of section 51.”
(§ 75.10, subds. (a), (b).) Thus, section 75.10 is consistent with
section 51 regarding the treatment of removed structures: the
value of the removed structure must be deducted from the
existing base-year value.
       Consistent with these principles, section 71 provides that
when new construction is complete, “[t]he assessor shall
determine the new base[-]year value for the portion of any
taxable real property which has been newly constructed. The
base[-]year value of the remainder of the property assessed, which
did not undergo new construction, shall not be changed.” (§ 71,
italics and emphasis added.)
       The interaction of these statutes is reflected in Property
Tax rule 463, subdivision (a) as follows:

            “When real property or a portion thereof, is
      newly constructed after the 1975 lien date, the
      assessor shall ascertain the full value of such ‘newly
      constructed property’ as of the date of completion.
      This will establish a new base[-]year full value for
      only that portion of the property which is newly
      constructed, whether it is an addition or alteration.
      The taxable value on the total property shall be
      determined by adding the full value of new
      construction to the taxable value of preexisting

                                14
      property reduced to account for the taxable value of
      property removed during construction. The full value
      of new construction is only that value resulting from
      the new construction and does not include value
      increases not associated with the new construction.”
      (Cal. Code Regs., tit. 18, § 463, subd. (a), italics and
      emphasis added.)

       Similarly, Property Tax rule 461 states, “[T]he prior year
taxable value of real property, or portion thereof, physically
removed from the site shall be deducted from the property’s prior
year taxable value, provided that such net value shall not be less
than zero.” (Cal. Code Regs., tit. 18, § 461, subd. (c).)
Subdivision (a) of that section expressly recognizes that
“[s]ection 2 of article XIII A of the California Constitution
provides, with certain exceptions stated therein, that real
property shall be reappraised if purchased, newly constructed
(regulation 463) or a change in ownership occurs (regulation 462)
after the original base year.” (Id., tit. 18, § 461, subd. (a); see also
Pope, supra, 146 Cal.App.3d at p. 1135 [noting SBE adopted
Property Tax rules 460 through 467 “to deal more broadly with
the issues raised by article XIII A”].)
       Finally, section 410 of the Assessor’s Handbook
(“Assessment of Newly Constructed Property”) provides the
following example of the interaction of these statutes and
regulations:

           “A taxpayer purchased a 1,200[-]square-foot
      home for $400,000, with $350,000 allocated for land
      and $50,000 for improvements. The home is located

                                  15
     in a highly coveted neighborhood that has seen many
     average homes renovated into large mansions. The
     taxpayer gutted the home to its foundation and studs,
     built a new perimeter foundation to support
     additional floors, and rebuilt the home into a three-
     story, 3,600[-]square-foot mansion.

     The new construction converted the renovated
     structure to the status of substantially equivalent to
     new. The base[-]year value of the improvements
     should be reappraised to the current market values of
     other comparable properties in the area. A portion of
     the existing base[-]year value should be retained for
     the studs and foundation system that were not
     removed. The base[-]year value of the land would not
     change.”

(California State Board of Equalization, Assessor’s Handbook
(AH), § 410: Assessment of Newly Constructed Property (May
2014, reprinted Jan. 2015), p. 29, italics added.)
      In sum, the Revenue and Taxation Code sections, Property
Tax rules, and the Assessor’s Handbook are consistent on this
point: After a property is purchased and acquires a new-base
year value, the value of any subsequently removed structure is to
be deducted from the base-year value. When the new
construction is completed, any new improvements are appraised
and assessed and their value is then added to the existing base
values. The value of the unchanged portion of the property,
however, remains the same. This allows a purchaser to retain

                               16
their Proposition 13 benefits going forward for any property that
remains unchanged.
      Property Tax rule 463 recognizes these principles by
stating: “In any instance in which an alteration is substantial
enough to require reappraisal, only the value of the alteration
shall be added to the base[-]year value of the pre-existing land
or improvements. Increases in land value caused by
appreciation or a zoning change rather than new construction
shall not be enrolled . . .” (Cal. Code Regs., tit. 18, § 463,
subd. (b)(2)(A), italics and emphasis added.)
      The County neither discusses nor denies the existence of
these statutes regarding the valuation of new construction.

D.    The County’s Reallocation of the Value of Removed
      Property to the Land Value Was Contrary to Law
      It is undisputed the Assessor reallocated the entire value of
the improvements removed by the Greenspans to their purchase-
price base-year land value based upon the non-binding analysis
of SBE’s counsel embodied in Annotation 170.0005 on the SBE
website.

       1.    Annotation 170.0005
       Annotation 170.0005 contains the following summary of a
letter issued by SBE counsel in August 2005:

      “Allocation to Value. An assessor may reallocate land
      and improvement values for a single-family residence
      when a property is substantially renovated within two
      years of its original purchase. Revenue and Taxation
      Code section 51.5 allows an assessor to correct any

                                17
      base[-]year value error or omission within four years
      after enrolling an assessment if that error was the
      result of the exercise of value judgment.”

       The cited letter issued by SBE counsel reflects the following
response to an inquiry sent by a taxpayer:8 A property owner
acquired a single-family residence in October of 2003 for
$245,000, and the Assessor allocated that purchase price as
follows: $200,000 to land and $45,000 to improvements. (State
Bd. of Equalization, letter of counsel to a taxpayer, Aug. 2, 2005,
p. 1 (hereinafter letter of counsel).) At the time of purchase, the
house was inhabitable but also “run down.” While renovating the
improvements, the owner encountered problems that caused the
renovation to become a major remodel. (Letter of counsel, supra,
at p. 2.) To correct an unrelated error, the county assessor sent
an appraiser to visit the property, and after that visit, the
Assessor sent a supplemental assessment notice, dated January
2005, reflecting that the purchase price of $245,000 had been
reallocated to $244,000 to land and $1,000 to improvements.
       Upon inquiry, the letter writer was informed that it was
the assessor’s policy to reallocate most of the purchase price to
land if a property has been substantially renovated within two
years of its original purchase, relying on the “rationale that the
owner bought the property for the land value alone if the
improvements were torn down within that two-year period.”
(Letter of counsel, supra, at p. 2.)

8     According to the SBE: “Annotations do not embellish or
interpret the legal rulings of counsel which they summarize.” (Cal.
Code Regs., tit. 18, § 5700, subd. (a).)

                                  18
      The letter writer asked SBE counsel three questions:
(1) whether the county assessor’s policy reflects the policy of
other county assessors or the SBE; (2) what provisions of
Proposition 13 and/or California Revenue and Taxation Code
authorize that practice; and (3) what steps can be taken to
change this policy.9 (Letter of counsel, supra, at p. 1.)
      As to the first question, SBE counsel stated that while it
was aware that “other county assessors have also employed this
practice” of reallocating most of the purchase price to land if a
substantial renovation occurred within two years, the SBE had
not weighed in on the practice. Counsel stated, “[T]he [SBE] has
not issued any policies or guidelines promoting or prohibiting its
application.” (Letter of counsel, supra, at p. 2.)
      In response to the second question, counsel stated, “We
believe that this practice is authorized by section 51.5, which
requires county assessors to correct errors or omissions made in
the determination of new base[-]year values.” (Letter of counsel,
supra, at p. 3.) In discussing the situation described by the
inquiring party, counsel stated the following: “Based on the
major renovation, the assessor apparently believed that an error
in value judgment occurred when enrolling the original base[-
]year values for this property. Events subsequent to that change
in ownership led the assessor to reallocate the land and
improvement values, changing the base[-]year values for both
during January 2005 . . . . Since the assessor discovered an
apparent error in value judgment within the four-year statute of
limitations prescribed by subdivision (b) of section 51.5, we

9      Throughout the letter, the name of the county at issue is
omitted. In the trial court, the Greenspans referred to this policy as
the “L.A. County method.”

                                   19
believe that the assessor was required to correct that error.”
(Ibid.) The SBE later summarized this by stating, “To the extent
that the original land and improvement value allocation may
have been an error in value judgment, we believe that section 51.5
would require its correction.” (Id. at p. 4, italics added.)
       As to the letter writer’s third query, SBE counsel stated the
property owner could appeal the reallocation between land and
improvements to the Board, alleging the reallocation resulted in
an amount that was too high for either the land or improvements.
(Letter of counsel, supra, at pp. 3–4.) This is what the
Greenspans did in this case. In one appeal, they challenged the
reallocation from improvements to land, arguing it was contrary
to statutory law. They challenged the subsequent valuation of
their completed new construction in a separate board appeal.10
       The letter concluded, “The views expressed in this letter
are only advisory in nature. They represent the analysis of the
legal staff of the Board based on present law and the facts set

10     Specifically, in their application challenging the reallocation
reflected in the County’s “escape” assessment, the Greenspans checked
the box indicating they were appealing the “[a]llocation of value of
property [a]s incorrect (e.g., between land and improvements).”
       To the extent the assessment appeals form contains a specific
category for allocation between land and improvements, we observe
that in 1999 in Annotation Number 190.0008, SBE counsel advised
that “[a] local assessment appeals board has jurisdiction to hear
supplemental assessment and base[-]year value appeals involving the
proper allocation of a total property value between land and
improvements for applications filed within the time limitations periods
of Revenue and Taxation Code section l605(b) for supplemental
assessments or Revenue and Taxation Code section 80 for base[-]year
value appeals.” (Annot., State Bd. of Equalization, Allocation of Value
(1999).)

                                  20
forth herein, and are not binding on any person or public entity.”
(Letter of counsel, supra, at p. 5.)

      2.      Automatic Reallocation of the Value of Removed
              Improvements to Land
       In this case, the Assessor did not deduct the original value
of the residence from the total value, leaving the original land
value intact, and then add on the value of the new construction.
The Assessor automatically reallocated the entire value of the
improvements voluntarily removed by the Greenspans to the
base land value from 2014, giving them “credit” for the garage
left on site. It did so based solely on the fact the Greenspans
requested their permit to demolish that portion of the structure
within two years of purchase. This automatic reallocation was
contrary to sections 51 and 75.10 which, consistent with
Proposition 13, require that the value of any structure removed
from real property be deleted from the base-year value. To the
extent the Assessor relied upon section 51.5, which allows an
assessor to correct “any error or omission” in base-year value, it
was not appropriate to do so here.

      3.    Reliance on Section 51.5
      Section 51.5 discusses circumstances under which county
assessors may correct assessments of base-year value. Section
51.5(a) provides that errors in the determination of base-year
value that do not involve the assessor’s judgment shall be
corrected in the year they are discovered. More pertinent here,
section 51.5(b) provides, “An error or an omission [in the
determination of a base[-]year value] which involves the exercise
of an assessor’s judgment as to value may be corrected only if it

                                 21
is . . . corrected, within four years after July 1 of the assessment
year for which the base[-]year value was first established.”
Section 51.5(c) provides that this four-year time limit does not
apply when the errors or omissions result from taxpayer fraud,
concealment, misrepresentation, or failure to comply with laws
concerning the furnishing of information.11
         In enacting section 51.5, the Legislature declared,
“[F]airness and equity require that county assessors have express
authority to make corrections to property tax base-year values
whenever it is discovered that a base-year value does not reflect
applicable constitutional or statutory valuation standards or the
base-year value was omitted.” According to the Legislature,
“[a]ny limitations imposed upon the assessor’s authority to
correct these errors would result in a system of taxation
which . . . denies the benefits of Article XIII A of the California
Constitution [(Proposition 13)] to some taxpayers where the
barred error or correction would reduce the base-year value.”

11      The County, in issuing the adjusted property tax bill to the
Greenspans regarding the reallocation of improvements to land, stated
the reallocation was for the following reason: “[R]oll bill correction
[for] escaped ass[essment] per sec[tions] 4821 or 531 R[evenue] & T[ax]
Code.” Section 531 more generally provides: “If any property
belonging on the local roll has escaped assessment, the assessor shall
assess the property on discovery at its value on the lien date for the
year for which it escaped assessment. It shall be subject to the tax rate
in effect in the year of its escape except as provided in [s]ection 2905 of
this code.” (§ 531, italics added; cf. Jensen v. Byram (1964) 229
Cal.App.2d 651, 652 [county could recover taxes as escaped
assessments, where “land was assessed and taxes were paid, but
through oversight, there was no assessment of improvements”],
overruled on other grounds by Bauer-Schweitzer Malting Co. v. City
and County of San Francisco (1973) 8 Cal.3d 942, 948.)

                                    22
Further, the Legislature feared that if assessors failed to place
value on property, allowing it to escape taxation, and they could
not correct the error, it “would violate the constitutional
requirement that all property in the state shall be subject to
taxation.” The Legislature expressly noted, “Nothing in this act
violates either the spirit or the letter of Article XIII A of the
California Constitution [(Proposition 13)] since all corrections
permitted by it must be consistent with applicable constitutional
and statutory valuation standards.” (Stats. 1987, ch. 537, § 1(a);
see also Plaza Hollister Ltd. Partnership v. County of San Benito
(1999) 72 Cal.App.4th 1, 17–18 [discussing section 51.5 and
recognizing legislative statement].)
      Here, in 2014, the Assessor set the Greenspans’
improvements value at $360,000, 40 percent of the total base-
year value. In 2017, the Assessor reallocated $320,000 of that
value to land based solely on a presumption: The structure
removed had a zero or de minimis value at the time of purchase,
otherwise the owner would not have removed it within two years.
There is no contention the Assessor reevaluated or even
considered what had actually been removed before deeming its
original assessment a mistake, enabling it to reallocate more of
the base-year value to land. To permit this automatic
reallocation to stand would allow the County to circumvent the
requirements of Proposition 13 (and effectuating statutes) by
automatically raising the land value after the removal of the
improvement and then tacking on the value of any new
improvement after construction is complete.
      The County argues that “[t]he Greenspans want credit for
the value of house that they themselves elected to tear down.”
That may be true, but that is what sections 51 and 75.10 direct.

                                23
The value of any structure—or portion thereof—voluntarily
removed is deleted, while the portion of the base-year value
attributable to land is maintained.
      The fact that the Greenspans elected to demolish the
residence may well have given the assessor cause to consider
whether it had made a mistake, but it did not establish that a
mistake had been made. (See generally Carlson v. Assessment
Appeals Bd. I (1985) 167 Cal.App.3d 1004, 1013 [observing
subjective value to owner is not an appropriate method of
assessment]; Wunderlich, supra, 178 Cal.App.4th at p. 689
[observing the separate assessment of land and improvements
required by article XII, § 13 of the state Constitution and
section 607 are rooted in “‘the purpose of equalizing separately
the assessments on land and on improvements’”].)12

E.    Remand for a New Hearing
      In their complaint for refund below, the Greenspans
requested either “a refund of all excess property taxes paid
because of the Assessor’s unlawful or improper practice of
reallocating improvements to land value” or alternatively “an
order that this matter be remanded to the . . . Board, for

12     Our opinion does not suggest that an appraiser must always
separately appraise improvements or land. (See AH, supra, § 502:
Advanced Appraisal, p. 5 [noting real property is generally appraised
as a single unit]; Western States Petroleum Assn. v. Board of
Equalization (2013) 57 Cal.4th 401, 422 [making general observation,
in context of regulation addressing declines in market value of
petroleum refinery property, that land need not be treated as a
“separate appraisal unit”].) Our discussion is limited to the facts and
statutes presented.

                                   24
reconsideration of the escape assessment without taking into
consideration the Assessor’s reallocation practice.” We agree the
latter remedy is appropriate here.
       The County asserts that during the Board hearing on
February 22, 2019, it presented “into evidence a sales comparison
appraisal of the Property to determine that the entire purchase
price of $900,000 should be allocated to the land.” The County
argues we should presume the Board relied on this evidence to
conclude the reallocation “was valid and supported by substantial
evidence.” We disagree.
       At the hearing, the County submitted two pre-construction
appraisals of the Greenspans’ property prepared the month of the
hearing (February 2019). One appraisal (labeled “pre-
construction”) valued the Greenspan’s property as of
December 28, 2016, at $936,650 ($900,000 land and $36,650
improvements) by comparing it to three small-lot vacant-land
sales. The appraisal stated that “[the] pre-construction [was]
valued as vacant land due to recent sale prior to demolishing of
duplex, left workshop and garage.” The second appraisal (labeled
“Prop. 8”) valued the property as of January 1, 2016, at $886,650
($850,000 to land and $36,650 to improvements) based on the
same three vacant-lot comparables.13 Like the other pre-
construction appraisal, this appraisal included the notation that
the “2016 Prop. 8 [was] valued as vacant land due to recent sale
prior to demolish[ing] of duplex, left workshop and garage.” Both
appraisals were expressly based upon the premise that the
property could be appraised as vacant land because the residence

13    Proposition 8, passed by the voters in 1978, provides for a
temporary reduction in assessed property value based on a subsequent
decline in market value. (Fisher, supra, 82 Cal.App.5th at p. 49.)

                                 25
was demolished within two years. Neither appraisal evaluated
the improvements that existed on the property prior to
demolition. Neither appraisal addressed the value of the
property in 2014 when the mistaken assessment allegedly took
place.14
      In its final decision on the allocation appeal, the Board left
intact the exact figure of $890,559 for the land value challenged
by the Greenspans in their appeal. This figure corresponds to the
adjusted property tax bill issued to the Greenspans for the 2016–
2017 roll year, which was admittedly based upon the fact the
permit to demolish was requested within two years of the date
the Greenspans purchased the property. As such, there is no
indication the Board did anything other than deny the allocation
appeal based on the reallocation conducted by the County
pursuant to its two-year automatic reallocation policy.
      Under these circumstances, we conclude a new hearing on
the reallocation appeal is the appropriate remedy. (Farr v.
County of Nevada (2010) 187 Cal.App.4th 669, 685–686
[determining that appropriate remedy is to remand for new
hearing under correct burden of proof, noting “[t]he Board is the
constitutionally designated body entrusted with the duty of
determining the value of property for the purposes of tax

14     The County also cites a Multiple Listing Services announcement
for the Greenspans’ property and argues it was best “characterized as a
teardown” because it was marketed in part as a “huge lot for future
building purposes.” However, the listing submitted by the County is
from a 2008 sale of the property, six years before the Greenspans
purchased it, states the property is a 2,476-square-foot home with four
bedrooms and two baths and adds: “Huge possibilities for this
property, single family, income or future building site for that
incredible estate home.”

                                  26
assessment”].) In reconsidering the Greenspans’ reallocation
appeal, however, the Board must recognize the County’s
automatic reallocation of removed improvements to land is
contrary to law. To the extent the County argues the original-
land and improvement-value allocation was an error in judgment,
an error should be shown.15 We otherwise express no opinion on
the merits of any such appeal. (Id. at pp. 685–686; cf. Georgia-
Pacific Corp. v. County of Butte (1974) 37 Cal.App.3d 461, 477–
478.)

15     We note the County also argues that under Property Tax rule
321, the taxpayer has the burden of proving the property was
improperly assessed. However, Rule 321 states that in any hearing
involving an escape assessment, the presumption affecting the burden
of proof is in favor of an applicant. (Cal. Code Regs., tit. 18, § 321,
subd. (d); see also Fisher, supra, 82 Cal.App.5th at p. 60.) An “escape
assessment” includes a correction of a base-year value under
section 51.5, such as the assessment that the Greenspans appealed
here. (Sunrise Retirement Villa v. Dear (1997) 58 Cal.App.4th 948,
956–957; see also Prang v. Los Angeles County Assessment Appeals Bd.
No. 2 (2020) 54 Cal.App.5th 1, 14–17.)

                                  27
                          DISPOSITION
       The judgment of the trial court is reversed. The trial court
is directed to enter a new judgment vacating the decision of the
Board and remanding the matter to the assessment appeals
board for a new hearing. Appellants are awarded their costs on
appeal.

                                           MORI, J.

      We concur:

            COLLINS, Acting P. J.

            ZUKIN, J.

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