Judge’s tentative ruling rejects all challenges to ULA transfer tax

Local real estate disappointed and fear tax could severely impede business

LA Judge’s Tentative Ruling Rejects Challenges to ULA Tax

Judge Barbara Scheper (left) LA Councilmember Hugo Soto-Martinez (right) along with a photo from the rally outside of the Stanley Mosk Courthouse (Getty, Twitter/X, Rally Photo by Andrew Asch for The Real Deal)

In a tentative ruling for the high-profile court case on L.A.’s Measure ULA transfer tax, Superior Court Judge Barbara Scheper said that she was likely to reject challenges to the new tax,  which have proven highly unpopular among real estate professionals.

Scheper presided over an Oct. 23 hearing for a motion by the City of Los Angeles to dismiss challenges from the Howard Jarvis Taxpayers Association and property owner Newcastle Courtyards.

Scheper said she was “inclined to find in favor of the city in each and every cause of action.” The judge did not release a written opinion. She also scheduled a case management hearing on Dec. 6. However, tentative rulings are often followed by final rulings weeks later.

Attorneys challenging the tax said that the tentative ruling was disappointing.

Laura Dougherty of Howard Jarvis Taxpayers Association said that there had been instances of judges reversing tentative rulings. However, in the likely case that the judge’s tentative decision would be final, Howard Jarvis Taxpayers Association would appeal. 

“This is round one, “ Dougherty said. 

Howard Jarvis Taxpayers Association argued that the California Constitution prohibits cities from levying a special tax with a simple majority of voters. Newcastle Courtyards filed a separate suit, with one main argument that Measure ULA violates real property owners’ equal protection rights under both the U.S. and California constitutions. Lawyers for the City of Los Angeles stated that the challenges should be dismissed in part because Los Angeles voters approved the ULA measure tax on the November 2022 ballot. 

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ULA defendants were encouraged with the tentative ruling. 

“We are hopeful that the judge’s final decision will uphold the will of the people and confirm the validity of Measure ULA,” said Joe Donlin, director of the United to House LA Coalition. Defendants include Donlin’s organization plus union SEIU 2015, Southern California Association of Non-Profit Housing, Korean Immigrant Workers Association and the City of Los Angeles. 

The courts may not be the last word on the measure. A ballot initiative written in part in reaction to the ULA  tax has qualified for the November 2024 state ballot. The Taxpayer Protection and Government Accountability Act would require new taxes passed by state leaders be placed on the California ballot for voter approval. At the local level, a special tax would need to be approved by two-thirds of voters, according to a description of the ballot initiative.

ULA supporters and union activists held a rally outside the Stanley Mosk Courthouse before the hearing. L.A. City Councilmember Hugo Soto-Martinez spoke at the rally. 

“It is the most transformative piece of legislation we have ever passed in the city of Los Angeles,” Soto- Martinez told the more than 30 people at the rally. 

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Measure ULA has been in effect since April. It assesses a 4 percent transfer tax to homes, industrial buildings and multifamily buildings sold for more than $5 million. It assesses a 5.5 percent transfer tax for buildings sold for more than $10 million.

In August, Los Angeles City Council approved about $150 million in ULA money to develop affordable housing, permanent housing for the homeless, as well as legal programs to prevent renter evictions. In the first four months since the tax was enacted, Measure ULA raised more than $55 million, according to media reports. 

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