From Orange County Register, in response to Getting around Prop 13 Editorial:
TUSTIN, Simon Turner, director, government affairs, Building Managers and Owners Association Orange County:
The editorial “Getting around Prop. 13”
However, there are often unintended consequences when legislation is based on public opinion polls. The public may not know that a conventional commercial building lease establishes a baseline for real estate taxes early in the lease term. Just like homes, the taxes are based on the building’s assessed value. If the property is reassessed, and the taxes go up, the lease allows the owner to pass the tax increase directly through to the tenant. The tenant, who is locked into the lease for a certain term, is obligated to pay the tax increase.
Another common lease type, known as a “triple-net lease,” requires tenants to reimburse or directly pay for real estate taxes. So, if commercial properties are excluded from the protections of Prop. 13, it is the existing tenant, not the building owner, who will pay the increased taxes.
Thousands of small businesses that lease space in commercial buildings throughout the state will be hit by these taxes at the worst possible time for California’s economy. We hope legislators will take the time to understand how commercial real estate leases are structured – perhaps by taking a peek at their own local office leases – before responding to populist demands to change Prop. 13.
Check out the original article on the OC Register: