4. Reassessment Upon Change of Ownership. Proposition 13 replaced the
practice of annually reassessing property at market value with a system based on
cost at acquisition. Prior to Proposition 13, if homes in a neighborhood sold for
higher prices, neighboring properties might have been reassessed based on the
newly increased area values. Under Prop. 13, the property is assessed for tax
purposes only when it changes ownership. As long as the property is not sold,
future increases in assessed value are limited to an annual inflation factor of no
more than 2%