Tulare County Seal

Tulare County

Office of the Assessor/Clerk-Recorder

Possessory Interest

A taxable possessory interest (PI) is created when real estate owned by a government agency is leased, rented, or used by a private individual or entity for their own exclusive use. The taxation of this interest is similar to the taxation of owners of privately owned property. A taxable possessory interest may be created or acquired through a contract, lease, concession agreement, license, permit, verbal agreement, or simply by possession or occupation without agreement. The use of the property may be concurrent or alternating with another use or user.


A base year value is established for taxable possessory interest upon its creation, a change in ownership, or completion of new construction under the guidelines of Proposition 13. This value, by law, will only increase by a maximum of 2% per year, until a new reassessable event (change of ownership or completion of new construction) occurs, or the property suffers a decline-in-value.  For an expanded definition see Revenue and Taxation (R&T) Code Section 61, 107-107.9, 480.6 and Property Tax Rules 20,21-22, and 27-28 available online at http://www.boe.ca.gov/proptaxes/proptax.htm. A change in ownership occurs when a possessory interest is created, assigned, or upon the expiration of the lease per Revenue & Taxation Code Section 61 available online at http://www.boe.ca.gov/proptaxes/proptax.htm. 

The valuation of possessory interests is different from other forms of property tax appraisal in two ways:

  1. Only the rights held by the private user are valued

  2. The assessor must not include the value of the lessor’s retained rights in the property or any rights that will revert back to the public owners (the “reversionary interest”) at the end of the lease. 

As a result, possessory interest assessments are frequently less than the assessments of similar privately-owned property.