We’ve all seen real estate advertisements containing seemingly enticing statements such as “Property is under Williamson Act contract for low-low taxes!!” Unless you enjoy paying your hard-earned money to the government, the promises of low taxes sound encouraging. But what does having a Williamson Act contract on a property really mean?
Williamson Act contracts are a creature of the California Land Conservation Act of 1965 (Gov. Code §§ 51200 et seq.). The Williamson Act was enacted to preserve agricultural lands and prime agricultural soils from “more profitable” commercial and residential development. Under the Williamson Act, a property owner voluntarily enters into a land conservation (Williamson Act) contract with the County (the contract is generally approved so long as all land conservation conditions are met, such as meeting the minimum lot size which is dependant on soil quality). Once the County approves the contract, the contract is recorded in the official records. The Williamson Act contract then runs with the property and binds all future owners to its terms and conditions. Primarily, the contract restricts the subject property to agricultural-related uses only. As a result of these restrictions, property taxes are reduced. Williamson Act contracts are for a term of ten years and are self-renewing – after the tenth year the contract automatically renews for another ten year term unless the property owner terminates by filing either a notice of non-renewal or cancellation request with the County. The County may also file a notice of non-renewal for properties found in violation of their Williamson Act contract.
The County of San Luis Obispo has adopted detailed standards and guidelines that, among other things, set forth the “compatible” uses for properties under Williamson Act contracts. These standards and guidelines are now in the process of being revised. However, in general, the compatible uses are all agricultural-related with a preference for “food and fiber” production and the preservation of prime soils. Some examples of the compatible uses are crop production, grazing, ag-processing, and animal raising and keeping. Single family residences, farm worker housing, and ag-accessory structures are also allowed but are subject to certain restrictions and provisions that can be found in both the County’s Williamson Act Guidelines and in its land use ordinance. Uses such as commercial horse breeding and training have also been found to be compatible, though recreational and personal horse operations have not; in order for recreational horse operations to qualify, the property must have some other underlying agricultural use. It is absolutely critical to know exactly what uses are and are not allowed along with your intended use of the property before a Williamson Act property is purchased as these restrictions do not go away!!
The primary benefit of Williamson Act properties is usually their “low- taxes.” At times the tax benefit is marginal at best as the contract’s burdens outweigh its benefits. Although the potential benefits of having a property under a Williamson Act contract may sound appealing to a prospective purchaser at first, the restriction becomes an almost impossible hurdle to overcome if the owner later chooses to transfer a portion of the property that is less than the Williamson Act contract allows. Instead, in order to transfer the property, a property owner will need to either cancel the Williamson Act contract (10 year process) or transfer enough property to meet the minimum parcel requirements for all contracted land (which is sometimes impossible). Additionally, depending on a property’s location and zoning, its Williamson Act taxes may be almost identical to its unrestricted taxes. Before any Williamson Act property is purchased consult the County assessor to determine what the actual tax benefits are for the particular property.
Williamson Act contacts may add significant value to a property but due diligence must be exercised to ascertain exactly what that value truly is and how a Williamson Act contract affects a particular property. While Williamson Act contracts are somewhat standard each property is unique. Sometimes a Williamson Act contract can make an otherwise unaffordable property affordable and sometimes the contract does nothing but frustrate a property owner’s rights. Effort to determine such value and burden will certainly be rewarded in the end. We encourage all Williamson Act property owners and prospective purchasers of Williamson Act properties to talk to a lawyer about how their Williamson Act contract affects their property.
Please stay tuned for a discussion on recent State policy regarding commercial horse boarding and breeding operations and recreational operations, and how these operations fit into the Williamson Act.