Tax Overallocation: How Landlords Bill You for Properties You Do Not Lease
If your landlord allocated real estate taxes from parcels outside your leased property or included special assessments your lease does not authorize, you are paying someone else's tax bill. Mello-Roos bonds and special improvement assessments routinely add $3,000 to $10,000 to CAM statements without explicit lease authority.
Definition
Tax overallocation occurs when a landlord charges a tenant for real estate taxes that do not correspond to the property parcel or parcels covered by the tenant's lease, or includes tax categories such as special assessments, penalty interest, or improvement bonds that are excluded from pass-through under the lease terms. Commercial leases allow tax pass-throughs only for the specific assessments tied to the leased premises and related common areas, not for other properties in the landlord's portfolio or for assessment types not named in the lease. Special improvement district assessments, Mello-Roos bonds, and supplemental assessments triggered by the landlord's sale of the property each require explicit lease authorization before they can be passed through. CAMAudit's tax overallocation detection rule extracts the property description and parcel information from the lease, compares it to the tax assessments included in the reconciliation, and classifies each tax line item for both parcel accuracy and category compliance.
Real estate taxes are one of the largest CAM line items. Even small errors in parcel allocation or assessment inclusion can result in significant annual overcharges.
How we detect
- 1
CAMAudit extracts the property description and parcel identification information from your lease and compares it to the tax assessments included in your reconciliation. CAMAudit's tax overallocation detection rule flags tax charges that reference parcel numbers or property addresses beyond the scope of your lease's defined premises.
- 2
CAMAudit classifies each tax line item for category compliance: standard ad valorem property taxes, special improvement district assessments, Mello-Roos bonds, penalty interest, and transfer taxes each have different pass-through eligibility rules. Special assessments require explicit lease authorization and are frequently included in CAM without it.
- 3
CAMAudit generates a finding that lists each flagged tax item, the parcel or assessment type, and the dollar amount. CAMAudit's output includes specific documentation request language for your audit rights request: the actual tax bills, the parcel breakdown, and the supporting assessment notices your landlord must produce.
Real-world example
A tenant's lease covered Unit 4 in a retail center on Parcel A. The annual CAM reconciliation allocated real estate taxes of ,000 across the entire center. A review showed the tax bill included $8,200 attributable to Parcel B (an adjacent parking structure owned by the same landlord) and a $3,100 special assessment for a street improvement district. Neither the Parcel B allocation nor the special assessment was authorized by the lease. CAMAudit flagged $11,300 in potential overcharges.