Legal Entity Ownership Program (LEOP) – Definition of Interest in Real Property

The property that will be subject to reassessment is any "Interest in Real Property" located in California that is owned or held under lease (under certain circumstances) by the acquired legal entity and any of its subsidiaries, as of the date of the change in control.  However, if a legal entity has undergone a change in ownership, the interest in real property is only property previously excluded from reassessment under section 62(a)(2).  Interest in real property includes any of the following:

With respect to real property OWNED:

  1. Any interest in land. For further information and examples, refer to Property Tax Rule 121.
  2. Any interest in improvements (e.g., buildings, planted fruit and nut trees and vines). For further information and examples, refer to Property Tax Rule 122.
  3. Fixtures (property which was originally personalty, but which is classified as realty because it is physically or constructively annexed to realty, e.g., restaurant equipment, built-in furnishings, conveyors, etc.). For further information and examples, refer to Property Tax Rule 122.5.
  4. It does not include real property OWNED, but that is being leased to a person or unaffiliated entity where the remaining term of the lease (including renewal options) exceeds 35 years.
  5. It does not include personal property owned (e.g., personal computers, office equipment).

With respect to real property held under LEASE:

  1. Any interest in land, improvements, or fixtures held under LEASE from a private owner, where the remaining term of the lease (including written renewal options) exceeds 35 years. For further information, refer to Property Tax Rule 462.100.
  2. Any interest in land, improvements, or fixtures held under LEASE from a public owner (i.e., any arm or agency of local, state, or federal government) for any term; or
  3. Mineral rights, including working interest in oil, gas and geothermal steam-producing properties owned or held on LEASE for any term, whether in production or not.
  4. It does not include real property OWNED, but that is being leased to a person or unaffiliated entity where the remaining term of the lease (including renewal options) exceeds 35 years.