Real Estate Tax

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  Joe 1 year, 7 months ago

  Real Estate Tax

  Hi Evan,

  Great article. One question for you: we are looking to start a lease in September. The landlord wants us to pay the full year of Real Estate taxes because they have “already laid the taxes out.” Is this common to come into the last 4 months of the year but the landlord want a full 12 months just for this year?

  Thanks!

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  Evan Tarver
  

  Moderator

  

  1 year, 7 months ago

  Hi Joe,

  Awesome, thanks for reading!

  Well, if you’re looking to lease commercial real estate, it seems to reason that the cost of the property taxes should be priced into the monthly lease payments. If I was the landlord and I had a monthly tax burden of $1k, I would make sure that the lease payment covered my loan + maintenance/utilities + taxes + whatever cashflow I wanted.

  So as I’m seeing it, you really shouldn’t be paying taxes for a commercial lease. Now, it’s possible that the landlord is using this as a negotiating tactic akin to asking for credit towards closing in the case of a purchase/sale. So you might be able to negotiate this away as I don’t think it’s normal.

  However, if you have to pay a lease agreement of a monthly lease payment plus tax, then the fair thing would be to pay the 4 months of taxes you expect to be there and not the months in which you didn’t occupy the property.

  Again this could be a negotiating tactic. I’d bring it up with the landlord.

  Let me know what ends up happening, and of course, consult with a leasing professional first.

  – Evan

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  David Waring
  

  Keymaster

  

  1 year, 7 months ago

  It sounds like this might be a “triple net” lease in which the tenant is expected to pay taxes, insurance, and maintenance. It wouldn’t be uncommon for the landlord to foot you with the entire bill, but it would be worth investigating how the landlord paid the taxes. If they are paying quarterly or monthly, then it’s probably a negotiating point that you’ll pay your share accordingly. Keep in mind that if all the tenants paid a full year’s taxes, but the landlord paid monthly, there’s the possibility the landlord could take the huge chunk of tenant tax money, but default on paying the taxes. Your space could end up in jeopardy through no fault of your own.

  It might be worthwhile to get your accountant and/or attorney to look at your lease and simply write a letter that you’ll pay taxes according to the same payout the landlord uses.

  #98855 Reply
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