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1. What is a Possessory Interest?

A Possessory Interest (PI) is created when a private party has the beneficial use of tax-exempt (government owned) property.

2. Why do I have to pay property taxes if the property is tax-exempt?

The California property tax laws allow for the users of the property to be assessed when the owner is tax-exempt because it is government owned.

3. How do Possessory Interests differ from other assessments?

Possessory Interests (PI) are only those rights held by the private possessor. PIs do not include the value of any rights retained by the public owner or any right that will revert back to the public owner at the end of the term of possession. PI assessments are normally less and often significantly less than fee simple assessments of similar, privately owned property.

4. How does the Assessor distinguish which Possessory Interests are assessable and those which are not?

For a Possessory Interest to be taxable it must be:

• Durable: There must be reasonably certain evidence to show that the possession will continue for a determinable period of time.
• Exclusive: Its holder must be able to exclude others from interfering with the use of the property, (or, where there is concurrent use, the concurrent use does not significantly interfere with the holder’s use).
• Independent: The use must be independent of the public owner. That is, its holder may exercise authority and control of the property apart from the rules and regulations of the public owner.

5. Why are Possessory Interest holders being charged property tax in addition to the rent they pay to a government entity? Isn’t that a form of double taxation?

Government entities do not pay property tax and thus their rent charges do not include an increment to recover such taxes. At the same time, the private possessor still receives the services and benefits (fire and police protection, schools and local government) that other similar taxable properties enjoy and the Possessory Interest property tax helps to pay the holder’s fair share of those costs.

6. How are Possessory Interests valued?

The income approach is the most commonly relied upon method. The value is typically based on the lease payments made to the landlord of the term of possession by the occupant.

7. Why are Possessory Interests assessed on the Unsecured Tax Roll?

Possessory Interests (PI) are normally assessed on the Unsecured Tax Roll because the property is not owned by the assessee and cannot provide security for the taxes owed. The county cannot lien the property in order to satisfy a delinquent property tax. PIs are assessed as real property on the Unsecured Roll but still fall under the umbrella of Proposition 13. Although PIs appear on the Unsecured Roll, they are still assessed according to the laws pertaining to secured real property.

8. How do Possessory Interest Unsecured tax bills differ from Secured Roll tax bills?

Unsecured tax bills are due and payable in full no later August 31st each year. If paid after August 31st, a penalty of 10% plus costs will be added to the amount due. Unsecured tax bills are not split into two installments with two different delinquency dates, as is true of Secured Roll tax bills.

9. I received a tax bill for the year July 1 through June 30, but I vacated the property in March. Why do I have to pay for the year after I vacated?

The assessee is determined on January 1st each year for the upcoming fiscal year, July 1st through June 30th. Tax bills for unsecured property become delinquent if not paid by August 31st each year. Contact the Assessor if you vacate the property between January 1st and June 30th.

10. Where can additional information about Possessory Interest Assessments be obtained?

View the Assessor’s Hand Book AH-517, The Appraisal of Possessory Interests (PDF).