The Santa Monica Rent Control Board is considering changing the way that landlords pass through portions of their property tax bills to tenants as surcharges on controlled rents. Today, landlords can in most cases pass through five line items on their tax bills that relate to things Santa Monica voters approved. They include:
- Bonds for improvements in the Santa Monica-Malibu Unified School District
- Bonds for improvements at Santa Monica College
- The Stormwater Management Fee
- The Clean Beaches and Ocean Parcel Tax
- The Santa Monica-Malibu Unified School District Parcel Tax
This conversation comes as the amounts tenants pay have been on the rise as property values and related property taxes increase, especially after a property is sold. The fundamental question is who should pay for property tax-related assessments that help fund the items above – landlords, tenants or both?
In one real-life example, in tax year 2016, a long-time owner (since 1972) of a 21-unit property paid total assessments of $1,532.32 for the five items that could be passed through. He could pass through $6.06 per unit per month in surcharges. When he sold the building in 2016, the building’s value was reassessed, increasing the five items on the 2017 tax bill to $20,104.70. With proper notice, the new owner could potentially charge $79.76 per unit per month in surcharges.
Starting March 1st, the Rent Control Board eliminated surcharge pass-throughs when a property is sold or reassessed due to elective property improvements. It also prohibited landlords from passing through the surcharges to new tenants who move in on or after March 1st.
Now, the Board is considering changes that may affect tenants who moved in before March 1st. The Board could require the owner to pay a share of the surcharges or establish a “cap” or maximum amount that can be passed through. The Board could also eliminate surcharges completely or leave things as they are. Before making a decision, the Board is interested in hearing comments from the public on the community’s preferred approach, including these ideas and others for consideration.
To those interested in commenting on the issue, visit https://www.smgov.net/Surcharge_Form.aspx?LangType=1033.
