Property owners in Florida enjoy various tax benefits. Many people are aware of the fact that Florida residents who have established a homestead may claim a 3% cap on the annual increase in the assessed value of their homestead property. However, the amount by which the assessed value of non-homestead residential property may increase is also capped at 10%. That can result in significant savings over time, especially as property values continue to increase. A cautionary tale.
“A change of ownership or control.”
Non-homestead property continues to accrue the benefit of the 10% cap so long as the property remains owned by the same owner. However, the statute that creates the 10% cap describes the event which will require the property appraiser to reassess the property at its current market value – in essence, doing away with any accrued cap savings. That event is “a change of ownership or control.” That phrase is defined by the statute as “any sale, foreclosure, transfer of legal title or beneficial title in equity to any person, or the cumulative transfer of control or of more than 50 percent of the ownership of the legal entity that owned the property when it was most recently assessed at just value.” There are some exceptions to that rule, but they have been fairly narrowly interpreted by courts.
A Cautionary Tale
In the 2023 case of S and A Property Investment Services, LLC v Pedro Garcia, Miami-Dade County Property Appraiser, et al, an appellate court was called on to determine whether a husband and wife’s transfer of property for liability protection purposes, to an LLC which they owned, qualified as a change of ownership or control. The property owners argued against that position, attempting to rely upon an exception in the statute for transfers “between legal and equitable title.” The court didn’t bite, finding that a transfer of ownership had occurred even if the husband and wife wholly owned the LLC since the LLC is a distinct legal entity. The result: the fact of the transfer caused the owners to lose the cap on assessed value which had accrued.
Don’t lose that cap!
The takeaway is straightforward: if you or a client own property that enjoys the benefit of the cap on assessed value, be sure to give careful consideration to any transfer of that property. While some transfers may not trigger a reassessment, other transfers will. A real estate attorney can assist you in determining what the effect of a transfer will be and can ensure that you avoid an inadvertent reassessment.
