What is the Mills Act in Los Angeles, California
If you’re a homeowner or prospective buyer in California, you may have heard about the Mills Act—a program that offers significant property tax savings to owners of qualified historic properties. But what does that look like in practice? Let’s break down the Mills Act and what it means for you as a homeowner.
What Is the Mills Act?
The Mills Act is a California program that provides financial incentives to homeowners to preserve and maintain their historic properties. Enacted in 1972, it allows cities and counties to enter into contracts with homeowners, reducing property taxes in exchange for a commitment to preserving the home’s historical integrity.
How Does the Mills Act Work?
Property Tax Savings
Homeowners who participate in the Mills Act can see their property taxes reduced by 40-60%. Instead of being assessed based on market value or purchase price, the tax calculation is based on the property’s income potential, which is often much lower.
10-Year Renewable Contracts
When you sign a Mills Act agreement, it’s typically a 10-year contract that automatically renews annually. This ensures a long-term commitment to preserving the property.
Inspection and Maintenance Requirements
In exchange for tax savings, you’re required to maintain the home’s historic features. This might include:
Preserving original windows, doors, and roofing materials.
Using approved methods and materials for repairs.
Keeping the property in good overall condition.
Responsibilities of Mills Act Homeowners
While the benefits are significant, participating in the Mills Act comes with responsibilities:
Adherence to Preservation Standards
Any renovations or repairs must comply with local historic preservation guidelines. This ensures the property retains its historical character.
Regular Inspections
Some cities or counties may require periodic inspections to ensure the property is being maintained according to the contract.
Higher Maintenance Costs
Preserving original materials or using approved restoration methods can be more expensive than modern alternatives.
Selling a Mills Act Property
If you decide to sell a home under a Mills Act contract, here’s what you need to know:
The Mills Act Contract Stays with the Property
Mills Act agreements are tied to the property, not the homeowner. When you sell your home, the new owner inherits the contract and all its benefits and obligations, including tax savings and maintenance requirements.
Potential Penalties for Noncompliance
If the property falls out of compliance with the Mills Act (e.g., the new owner makes unapproved modifications), the contract can be canceled by the city or county.
Cancellation may result in a penalty fee of 12.5% of the property's current fair market value.
Disclosing the Mills Act to Buyers
Sellers are legally required to disclose the Mills Act agreement to potential buyers. Buyers need to understand their responsibilities under the contract, including maintaining the home’s historical integrity.
Canceling the Mills Act Contract
While it’s possible to cancel the contract before selling, this is rare and usually requires approval from the local government. Cancellation may still result in financial penalties.
How to Apply for the Mills Act
If you’re interested in enrolling your property in the Mills Act, here’s how to get started:
Verify Historic Designation
To qualify, your home must be officially designated as historic by a local, state, or national registry.
Contact Your Local Government
Reach out to your city or county’s planning or preservation department to confirm whether the Mills Act is available in your area and to get details on how to apply.
Submit an Application
Applications typically include documentation of the property’s historical significance and a preservation plan.
Who to Contact for More Information
If you have questions about the Mills Act, historic property regulations, or tax implications:
Your Local City Planning Department
They can provide details about Mills Act contracts, inspections, and maintenance guidelines.
The Los Angeles Conservancy
This organization offers resources and guidance for homeowners of historic properties.
Tax Professionals
For questions about property tax savings or potential penalties, consult with a CPA familiar with Mills Act agreements.
A Real Estate Agent Experienced in Historic Properties
I can help you navigate the process, whether you’re buying, selling, or maintaining a historic home.
Is the Mills Act Right for You?
The Mills Act offers homeowners a unique opportunity to save on property taxes while preserving a piece of history. However, it requires a commitment to maintaining the property’s historic integrity and understanding the responsibilities that come with the program.
If you’re considering a historic home or want to explore the Mills Act further, I’d love to help you through the process. Contact me at HERE or give me a call at (424)433-3747.
Best regards,
Lindsay Woolf | CA DRE #02236711
DOMO Real Estate | CA DRE #01290500
Disclaimer: The information in this blog post is for general informational purposes only and does not constitute legal advice. Real estate transactions can be complex and subject to local regulations.
