Commercial Property news recently reported the sale of 12100 Wilshire Boulevard, Los Angeles, California the office building where my law firm is located. This 19 story commercial office building is located at the corner of Wilshire and Bundy in West Los Angeles. The sale price is undisclosed, but is reportedly in the ballpark of $230 million. From the prospective of a commercial real estate attorney, the sale of an office building can have significant tax implications to a commercial tenant.
Typically, most commercial leases require the tenant to pay its proportionate share of the buildings real property taxes. Therefore, the sale of an office building may trigger increased taxes to a commercial property tenant. When the sale of the building occurs, the previous tax level, the “trended base value”, will increase if the building is sold at a higher price.
Therefore, it is important for a commercial tenant, when negotiating a lease for commercial office space to consider whether there is a possibility the building may be sold in the near future. If a sale of the building is likely then the potential tenant should negotiate a “Proposition 13 Protection” that will restrict the landlord’s ability to pass through property tax increases to the tenant.