How can property taxes impact lease agreements?

Property taxes can significantly impact lease agreements primarily through the ability to pass these costs on to tenants under specific types of leases. In many commercial and some residential leases, there are provisions known as "pass-throughs" that allow landlords to transfer certain expenses, including property taxes, directly to the tenants. This means that when property tax assessments increase, the landlord can adjust the amount charged to the tenant to reflect those increased costs.

Leases that include pass-through provisions often specify how property taxes are calculated and allocated among tenants, which can help landlords manage their expenses more effectively while providing tenants with a clear understanding of their financial obligations. As a result, understanding this aspect of lease agreements is crucial for both property managers and tenants, as it can impact rental costs and expenses significantly. This structure ensures that landlords are not solely burdened by increasing property taxes, shifting some financial responsibility to the tenants as stipulated in the lease terms.