731 Market Street Owner, LLC v. City and County of San FranciscoAnnotate this Case
In 2009, 731 Market leased the ground floor of its commercial building to CVS for a term of 45 years. Once the lease was recorded with the City and County of San Francisco, a “Real Property Transfer Tax” was paid under the San Francisco Business and Tax Regulations Code, based on the value of the stream of rental payments due over the lease’s life. In 2015, 731 Market sold the building, which included the CVS lease. All terms of the original lease remained unchanged with a remaining term of more than 35 years. 731 Market paid a documentary transfer tax, then unsuccessfully sought a refund of the amount of tax it paid based on the value of the remaining stream of payments due over CVS’s lease.
The trial court and court of appeal agreed with 731 Market that the 2015 transaction did not trigger the tax as to the leasehold interest because the transaction did not result in any “realty sold” under the ordinance. San Francisco impermissibly collected a “double tax” on the property.