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Who pays property taxes on a commercial property?

On Behalf of | Jan 30, 2023 | Real Estate Litigation

Property taxes are assessed on both residential and commercial properties, and the total costs fluctuate every year with the value of those properties. However, they can be quite substantial, with tens of thousands of dollars assessed on major pieces of real estate.

Generally speaking, these property taxes have to be paid by whoever owns that property. The real estate investor, who is renting out the space, would then be liable for the tax burden of that property. The tenant who is simply leasing the space has to pay a monthly rent, but they should not have to worry about these additional costs. They just have to stay current on the rent.

Adding a net

That being said, there are certainly ways to set up a commercial lease so that the tenant has to pay the property taxes. One way to do this is with a single-net lease. It simply bundles the property taxes in with the monthly rent, and these obligations are then given to the tenant instead of the property owner. Another option could be to use a double-net lease, which adds property insurance, or a triple-net lease, which adds in the cost of maintenance and upkeep.

The key to doing this is to understand your obligations in advance and to set it up this way from the beginning. A landlord who has simply used a basic lease requiring merely rent payments cannot suddenly change their mind and demand payments for property taxes. But if they provide the tenant with a single-net lease at the beginning, then the tenant knows exactly what they are agreeing to and will be liable to cover those costs.

To make sure everything goes smoothly, be sure you know what legal steps to take.