Real Estate Tax
Real estate tax means the property tax local governments assess against land, buildings, and other taxable real estate. In a commercial lease, real estate taxes are often passed through to tenants under a triple net lease, but only for the tax parcel, property period, and pro-rata share the lease permits.
Firm impact
Real estate tax pass-throughs become audit findings when the landlord bills taxes from the wrong tax parcel, includes a special assessment the lease excludes, keeps tax appeal savings, adds late-payment penalties, or allocates the bill using the wrong pro-rata share. Tax overallocation is one of CAMAudit's detection rules because a single parcel or denominator error can repeat across every tenant in the property.
How this gets abused
A landlord passed through the full property tax for a campus that included a separate tax parcel for an outbuilding not covered by the tenant leases. The tax on that outbuilding was $28,000 per year, and the landlord billed it entirely through the CAM reconciliation. The same reconciliation also omitted a tax appeal refund that should have reduced the tenant pool.
Practitioner note
Request the actual property tax bills, parcel map, assessment notices, tax appeal records, and payment history for the reconciliation year. Match each tax parcel to the leased property, remove excluded special assessments and late-payment penalties, then recalculate the tenant share using the lease denominator. Appeal savings should generally follow the same allocation method as the tax charge unless the lease says otherwise.
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Frequently asked questions
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