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Dear D. S.:
Yes, it is true. The exemption to which you refer is set forth in California Revenue and Taxation Code, Section 69.5, and does, indeed, permit certain eligible “severely and permanently disabled” persons to avoid property tax reassessment (and the increased property taxes, which typically accompanies reassessment), when they sell their existing homes and purchase a new residence.
As our readers may recall, real property taxes are regulated under state law, but are assessed and collected at the county level, as an important source of income for cities and counties.
The law, which sets forth the rules governing increases of assessed real property value, generally, limits the increases to a set percentage of the property’s “base year value”. The law, also, regulates the conditions under which a county can reassess the property’s value at its present full market value.

By operation of these laws, a property reassessment occurs, when there is a “change of ownership” as defined by the law, usually upon transfer of the property. However, the law provides for various types of exempted transfers, which, when applicable, do not fall within the definition of “change of ownership” and which do not trigger reassessment of real property. For example, subject to certain conditions, a person, who is “severely and permanently disabled”, can transfer the “base year value” of their previous residence to a replacement dwelling of “equal or lesser value”.
In order to be eligible for this exemption, applicants must qualify pursuant to Revenue and Taxation Code, Section 74.3(b), which defines "a severely and permanently disabled person" as:
“any person who has a physical disability or impairment, whether from birth or by reason of accident or disease, that results in a functional limitation as to employment or substantially limits one or more major life activities of that person, and that has been diagnosed as permanently affecting the person's ability to function, including, but not limited to, any disability or impairment that affects sight, speech, hearing, or the use of any limbs.”

Moreover, to be eligible for the “severely and permanently disabled” exemption, the applicant must have actually resided at the previous property, and the replacement home must be purchased no more than two (2) years (either before or after) from the sale of the previous home.
The exemption does not apply to transfers of property in a different county, unless the new county recognizes qualified transfers from other counties.
Applications for the “severely and permanently disabled” exemption must be filed within three years of the date the replacement dwelling was purchased (or when new construction of was completed, if newly constructed). There are, also, other requirements that may apply, depending upon the circumstances.

Readers may address their questions to The Real Estate Lawyer, Fred M. Duman, 2807 Castro Valley Boulevard, Castro Valley, California 94546. Mr. Duman will answer those of general interest in his column. He reserves the right to edit the letter for brevity and clarity.

Each real estate problem usually has its own distinct circumstances, and frequently is more complicated than realized by a layperson. Readers are also encouraged to consult with their own lawyers to obtain guidance concerning their problems when they first arise.

Readers are cautioned that these answers are not intended to be the basis for any action or reliance by the reader.
You are welcome to visit our web site at “www.dumanlaw.com”.

Disabled People May Be Able to Transfer Low Property Tax Assessment from Old Home to New Home