The year-over-year increase in property taxes passed through to tenants as part of CAM or as a separate line item. Property tax escalation is typically excluded from CAM caps, making it one of the largest uncontrolled costs in a commercial lease.
Property tax escalation reflects changes in assessed value, millage rates, or both. In most jurisdictions, assessed value is reassessed periodically (annually or upon sale/transfer). Millage rates are set by local taxing authorities. Tenants pay their proportionate share of the total tax bill. Significant escalation events include property sales (triggering reassessment to market value), new construction, and tax rate increases by municipalities.
A property sells for $15M, triggering a reassessment from $8M to $14.5M. The landlord passes the full tax increase through to existing tenants even though the sale price reflects the landlord's investment gain, not an increase in operating costs attributable to the tenants.
Monitor your county assessor's website for changes to your building's assessed value. If the property was recently sold, check whether the tax increase reflects a reassessment triggered by the sale, and review your lease for any provisions that cap tax pass-throughs after a sale.
Worried about property tax escalation in your lease?
Need to extract lease terms before your audit?
A CAM audit is only as accurate as your lease data. lextract.io extracts 126 structured fields from any commercial lease PDF: CAM definitions, pro-rata share, caps, base year, and audit rights. So you have the exact terms your landlord is supposed to follow.
Go to lextract.ioUpload two PDFs. 14 detection rules. Under 15 minutes. Free.
Find My OverchargesThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.
