Property Taxes in CAM Reconciliation
Ad valorem taxes levied by local jurisdictions based on the assessed value of real property. Property taxes fund local government services including schools, fire departments, police, and infrastructure. They are assessed annually and typically paid in installments.
Benchmarks per SF
Source: BOMA EER / IREM 2024
Typical GL Codes
Recoverable Components
- Base property tax
- Special assessments (if lease allows)
- Tax protest fees (if successful)
- Supplemental tax bills from reassessment
Non-Recoverable Components
- Penalties for late payment
- Interest on delinquent taxes
- Tax attorney fees for unsuccessful protests
Allocation Method
Pro-rata by rentable square footage. Not subject to gross-up (taxes are a fixed cost that does not vary with occupancy). Some leases allocate property taxes based on assessed value allocation between retail, office, and other uses in mixed-use buildings.
Common Lease Language
“Tenant shall pay Tenant's Proportionate Share of Real Estate Taxes, defined as all taxes, assessments, and governmental charges levied upon or with respect to the Building and Land, including any tax levied in whole or in part in lieu thereof.”
Common Billing Errors
- Incorrectly grossing up property taxes (taxes are a fixed cost)
- Failing to credit tax protest refunds back to tenants
- Double-counting supplemental tax bills
- Including land taxes for undeveloped parcels in the building's tax pool
Year-over-Year Trends
Property taxes have increased 5-8% annually in major metros since 2020, driven by rising assessed values. Some jurisdictions cap annual increases (California Prop 13, Texas SB 2) while others allow uncapped reassessment. Tenants are increasingly negotiating tax caps or base-year stops.
Additional Context
Property taxes are typically the largest single line item in CAM pools, comprising 30-40% of total operating expenses. Tax protest activity has increased significantly, and landlords should pass through refunds to tenants within 60 days of receipt. Many leases require landlords to make reasonable efforts to protest assessments.
Related Resources
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