Ken Fields, a Partner in the firm's Real Estate Group, recently shared his insights with Daily Journal, regarding the “mansion tax” penalty on luxury real estate properties in Los Angeles, CA.

Excerpts:

“Prior to the act going into effect, we saw a glut of properties going on sale. We had transactions where the seller could terminate the deal if it was not completed before Measure ULA went into effect,” Fields said.

Various aspects about the tax are still not clear. The expectation is that foreclosures are exempt from documentary transfer taxes, Fields said.

“A lender will not worry about a Measure ULA tax unless the tax is so large that it, economically, no longer makes sense to foreclose. The bigger issue is when it underwrites a new loan or refinance whether it impacts the value of the asset on the sale in a material way to change the lender’s underwriting,” Fields said. “Now it’s another cost written into the deal.”