The property tax is a local tax borne by the owner of a property. It is valid for individuals as well as for companies. What exactly is the property tax?
Principle and Definition of Property Tax
Who pays property tax under a commercial lease? The property tax is a local tax charged each year to the owners of real estate. This tax is implemented in order to identify all the fiscal resources of each municipality. The owner can be an individual or a business. Following this principle, the property tax must be paid by the owner, and therefore, in the case of a contract of commercial lease, by the lessor. In fact, this tax is often borne by the tenant of the commercial premises. We will see below under what conditions. For California business property taxes this goes perfect.
What Properties Are Eligible For Property Tax?
Several properties are affected by the payment of this local tax:
- Built properties, that is to say constructions for residential or professional use,
- Undeveloped properties, that is, land without construction such as ponds or rural land.
Please note: the property tax is to be differentiated from the housing tax paid each year by the occupant, whether the owner or the tenant.
How Is The Property Tax Calculated?
Each year, the amount of property tax is reassessed. This calculation is based on:
The cadastral rental value of the property: this corresponds to the value that the property could obtain in the event of rental under current market conditions. Its amount is calculated again each year in order to take into account the evolution of rents,
The revaluation coefficient: the amount of this coefficient is fixed each year by the government finance law,
The local authority tax rate: the municipalities act by voting each year a rate applicable to the payment of property tax.
What Is The Tax Base For Property Tax?
Regarding a built property, the amount of the tax base corresponds to half of its rental value. A 50% flat-rate reduction is thus obtained. For un-built properties, the allowance is 20% and the amount of the tax base is therefore 80% on the rental value of the property in question. Not have the amount of property tax to be paid. You must add the tax rate set each year by the local authorities.
This property tax must be paid each year. Payment can be made by post (check) or dematerialized. It is established in the name of the owner.
Please note: the property tax must, in principle, be borne by the owner. If no clause specifies payment by the tenant, local tax is charged to the owner (lessor) of the lease contract.
The second reason is that it happens that new constructions are declared to the property tax center as soon as they are completed, but before the interior fittings are carried out. Thus, no weighting coefficient has been applied and the entire surface is retained. It is therefore the correct weighting of the parts that will allow the tax to be optimized.
This weighting coefficient, which is applied to the real surface area of the different parts of the premises, is intended to translate, on the one hand, the use value, on the other hand, the commercial value of the location of each part of the local in relation to the whole.
Find a Property
The objective of the law is to regulate the rights and obligations of the parties, in particular on the charges imposed on tenants. For this, it obliges the lessor to keep at his expense several costs specified by the implementing.
This is the case with:
- Upgrading work, particularly in the event of dilapidated premises or new regulations,
- Fees related to the management of the commercial premises,
- Major repairs concerning the solidity or the general structure of the building (face lifting),
- Expenses related to business premises unused or used by other tenants in an apartment building.
Note: the law specifies that the rental contract must include a precise and limiting inventory of charges, taxes and duties shared between the two parties.
To reduce the property tax it is necessary to establish (or have established) a diagnosis in order to know if you’re building is in a surtax situation.
The first element to examine is the area of the room: you can quite easily determine its real area. On the other hand, the weighted area, which is based on the application of correct weights, is much more difficult to calculate.
However, The Property Tax Is Not Present In The Above List.
Thus, this legislative amendment does not remove the possibility for the lessor to charge the property tax to his tenant. He can therefore continue to insert a clause in the commercial lease contract to make him bear this expense. Ultimately, the owners retain the possibility of making their tenant bear the payment of the property tax. However, they must ensure that they comply with the new obligations regarding the payment of charges.