Does Lessee pay Property Tax?

[ProDetail]

Ok, so as some of you may know I have been in the process of opening a new fixed shop in my area and go Full-Time with my passion. Over the last couple of weeks we have been discussing the lease terms and as a result have been going back and forth so that we have a lease that benefits both Lessor and Lessee.

Well the Lease is almost done, but in the latest amendment I have received is as follows:

• Lessee is responsible for all utilities including water and sewer. (Which is one of the ones I agree with)
• Lessor gets ONE free detailing per month. (It really says that lol)
• Lessee is responsible for property taxes. These taxes are due each quarter and paid to Lessor. (Is this common? Legal?)

The Lessor is a pretty cool guy and has been pretty cool with my suggestions and negotiations but this doesn't seem right to me, so I bring it before those who's opinion I hold in regard before bringing it back to him.
Any feedback and/or suggestions would be greatly appreciated.
Feed back please

 

[1oldsalt]

This is something I have never encountered before. Perhaps it is different in your state.

Generally the property tax expenses are figured into the lease price by the lessor.

I have rental properties and I pay the property tax on them. It's my responsibility as the owner.

What does this guy do when the property is vacant? If property values changed downward, as they have in recent years, what power do you have to get the property reassessed to a lower rate?

Perhaps you should contact a real estate agent in your area and see if this is common practice.

 

[Rmd]

Common, yes, and legal, yes. If you pay base rent and insurance that is a single net lease. Make sure that you know, and the lease states, how your tax portion is determined; e.g. are you renting only part of a larger building, or part of a larger parcel of property? If so is your tax contribution to the landlord a corresponding percentage of what is billed by the tax authority, etc, and the landlord will need to provide you with the tax bills so there is no mystery as to what is being paid.

 

[Setec Astronomy]

As Rmd says, yes it is common to have to pay property taxes on a lease (depending on the terms, of course). The part that's a little hinky is you paying them to the landlord...the taxes get paid to the town, so if you are responsible for the taxes, you should be paying them to the town, not him, unless as Rmd says you are not leasing the whole property, in which case IMO the landlord should roll that into the lease payment, as 1olsdalt notes.

 

[mwoolfso]

Your lease is closer to a "triple-net" lease and it is legal (rent, maintenance and taxes). For commercial real estate, net leases are normal here in NY.

You should ensure you have the right, spelled out in the lease, to get actual copies of any property tax notifications (that may affect $$$), and bills the lessor receives from government entities. Preferably, you want this information within several days of his receipt of the information.

Also, many government entities have their property tax information online. So even if you cannot negotiate real copies you may have another avenue to establish some checks-and-balances.

 

[jwgreen6]

I'd show the lease to an attorney to ensure the lease is legal and does not have any "hidden" tricks that may violate your rights as a lessee. In this day and age, CMA does not mean "Country Music Association" but "Cover My Ass-ets".

 

[ProDetail]

This is something I have never encountered before. Perhaps it is different in your state.

Generally the property tax expenses are figured into the lease price by the lessor.

I have rental properties and I pay the property tax on them. It's my responsibility as the owner.

What does this guy do when the property is vacant? If property values changed downward, as they have in recent years, what power do you have to get the property reassessed to a lower rate?

Perhaps you should contact a real estate agent in your area and see if this is common practice.

The property itself hasn't been in use for over a year, that's no rent or nothing for a year in part because of the town. The company that owns it is a landscaping company that stored there trucks on the site but have moved to a larger location. The town itself is "finicky" in what they will allow to open on that location. They do not want a auto body shop there and there are two automotive shops within sight of each other so a detailing shop is the perfect fit.
The town itself has been very hospitable towards me with any questions, permits etc... alot more than any other town I've worked out of.
I took it to a buddy who owns a real estate company and she referred me to an attorney for a more in-depth look to assure that its a lease that's as beneficial to my company as it is to the lessor.

As Rmd says, yes it is common to have to pay property taxes on a lease (depending on the terms, of course). The part that's a little hinky is you paying them to the landlord...the taxes get paid to the town, so if you are responsible for the taxes, you should be paying them to the town, not him, unless as Rmd says you are not leasing the whole property, in which case IMO the landlord should roll that into the lease payment, as 1olsdalt notes.

I just thought it was weird because I have not not payed any property taxes on any property I have rented to date.
The lease specifically says that property taxes are to payed to the Lessor, it doesn't say anything about paying them to the town. That was another "warning" bell to me.

Your lease is closer to a "triple-net" lease and it is legal (rent, maintenance and taxes). For commercial real estate, net leases are normal here in NY.

You should ensure you have the right, spelled out in the lease, to get actual copies of any property tax notifications (that may affect $$$), and bills the lessor receives from government entities. Preferably, you want this information within several days of his receipt of the information.

Also, many government entities have their property tax information online. So even if you cannot negotiate real copies you may have another avenue to establish some checks-and-balances.

I have a copy of the previous years property tax, if someone wants you to pay property tax and doesn't give you a copy of the taxes themselves, that to me would be a "Do Not Enter" sign to the fullest.

I'd show the lease to an attorney to ensure the lease is legal and does not have any "hidden" tricks that may violate your rights as a lessee. In this day and age, CMA does not mean "Country Music Association" but "Cover My Ass-ets".

Thanks, I have an appointment for tomorrow to have the referred attorney to review the lease.

Thanks guys for the advice, anybody else able to chime in would be greatly appreciated. Especially if this can help someone in the future with the same question or problem.