Big rent hikes aren’t the only thing hitting office tenants these days.
Hefty property tax increases are being passed on to hundreds of Orange County tenants in buildings that recently have changed hands in a hot market for office deals.
In cases where a building sells for the first time in years, the assessed value,and corresponding tax bill,easily can double.
Tenants are hesitant to talk on the record about the increases,fearful of raising the ire of their new landlords. And, with space tight in much of the county, there’s little they can do about it.
Building owners can pass along property tax increases and other costs,known in the business as pass through,unless leases explicitly bar them from doing so. Few leases insulate tenants from tax bills, according to brokers.
Landlords say they’re aware of the impact of the higher taxes on tenants. But they’re quick to note that many renters have benefited from “artificially suppressed” taxes on buildings that haven’t change hands for years.
Under Proposition 13, the assessed value of a building, or home for that matter, can’t rise more than 2% a year. If a building doesn’t change hands for years, the assessed value is likely to be well below market value.
A building sale resets the meter. The building is reassessed at the sale price, with a tax rate of 1% and assessment increases of 2% a year.
For more on this story, see the May 22 edition of the Business Journal.
