When Landlords Can Pass Property Tax Increases to Tenants

Answer

Intro: Rising property taxes can significantly impact landlords, especially in states or cities where rates are reassessed annually. A common question from tenants and property owners is whether a landlord can shift those increased costs onto renters. The answer depends on the type of lease agreement, local laws, and how the rental contract is structured.

Residential leases: In most standard residential rental agreements, tenants pay a fixed rent amount that already factors in the landlord’s property tax obligations. Unless the lease specifically includes a tax escalation clause, landlords generally cannot raise rent mid-lease to cover higher property taxes. They must wait until the lease term ends and then propose a new rent amount upon renewal, subject to state and local rent control laws where applicable.

Commercial leases: The situation is different for commercial tenants. Many commercial leases are structured as “net leases,” where tenants pay not only base rent but also a share of operating expenses, including property taxes, insurance, and maintenance. These agreements often contain escalation clauses that allow landlords to pass tax increases directly to tenants. For example, in a triple-net (NNN) lease, tenants are responsible for nearly all property expenses, including any increases in taxes.

Rent-controlled areas: In cities with rent stabilization or rent control, local ordinances may restrict a landlord’s ability to pass property tax increases to tenants. Some jurisdictions allow landlords to petition for limited rent increases to cover higher operating costs, while others strictly prohibit such adjustments outside approved annual increases. Tenants living under these protections should review local housing authority guidelines to understand their rights.

Lease terms matter: Even in non-rent-controlled markets, landlords can only pass property tax increases to tenants if the lease includes clear language authorizing it. This might appear as a “tax escalation clause” or “additional rent” provision. Without such wording, the landlord must absorb the cost until the lease expires.

Summary: Whether tenants must pay for property tax increases depends on the lease type, applicable state or city laws, and the presence of specific clauses in the rental agreement. Residential tenants with fixed-term leases usually cannot be charged extra during the lease, while commercial tenants under net leases often share in these expenses. Before taking action, it’s advisable for both landlords and tenants to review their lease and consult a licensed attorney or local housing authority to confirm what is legally permitted in their jurisdiction.