A tax stop is a provision in a lease agreement that limits the amount of property taxes a landlord must pay. When a tax stop is in place, the landlord is responsible for property taxes only up to a specified amount. Any taxes above this threshold are typically passed on to the tenant. This clause helps tenants manage their costs and provides clarity on potential increases in property taxes during the lease term.
Tax stops are commonly used in commercial real estate leases. They are particularly relevant in negotiations between landlords and tenants, as they help define financial responsibilities regarding property taxes. This term is primarily associated with real estate law, but it can also intersect with contract law, as the lease is a binding agreement between parties.
Users can manage tax stop provisions effectively with the right legal templates, such as those available through US Legal Forms, which are drafted by attorneys to ensure compliance with local laws.
Here are a couple of examples of abatement:
Example 1: A commercial lease includes a tax stop set at $5,000. If property taxes rise to $6,000, the landlord pays the first $5,000, and the tenant is responsible for the additional $1,000.
Example 2: A lease states that the tax stop will increase by 3 percent annually. This means that both parties agree to adjust the threshold amount each year based on this rate (hypothetical example).
| State | Tax Stop Provisions |
|---|---|
| California | Commonly used in commercial leases, often includes specific tax increase caps. |
| New York | Tax stops are prevalent, with varying thresholds based on property type. |
| Texas | Tax stop clauses are less common but can be negotiated in larger commercial deals. |
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
If you are entering into a lease that includes a tax stop, carefully review the clause to understand your financial responsibilities. Consider the following steps:
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