Thus, there is no unanimity in the construction of a tax escalation clauses when changes of circumstances cause the original landlord not to be the one who actually pays the real estate taxes.
Most commercial leases contain a tax escalation clause which provides that the tenant will pay as additional rent his proportionate share of any increase in real estate taxes on the entire building.
The lease contained a tax escalation clause which stated that the tenant (Bryant Imports Inc.
The landlord in this case argued that the tax obligation on the building is increased even though the obligation to pay the taxes was merely shifted from the landlord, 1100 Associates, to another tenant, HBO; and that the shifting of the obligation to pay the tax does not nullify the effect of the tax escalation clause under the lease with Bryant Imports.
The cases cited by the majority to support its position that the tenant was not responsible for additional rent came from cases which stood only for the proposition that if the landlord seeks additional rent under a tax escalation clause such as found in this case, the amount of the additional rent is limited proportionately by the amount of increased tax actually paid, as opposed to merely an increase in the tax assessment over the base year.
Some owners, as well as tenants with escalation clauses
, will be paying higher taxes since the transitional assessment will be above last year's billable assessment.