Hi, We have several properties under the one name and pay a huge amount of land tax. I was wanting to know if anyone had their leases written to recover the full amount of land tax for that property from the tenants? J
Yes on a fully net lease or a lease to a government department. This is very common. Generally you will only recover on a single holding basis ie Land value minus threshold. The tenant doesn't care how many properties that you own so may only pay their share
I assume most commercial properties of the size where land tax would be an issue would be in separate entities anyway.
In NSW land tax cannot be charged to the tenant of a residential lease. It could be built into the rent.
Terry is correct that you can add it to the rent but if that pushes it higher than the house next door where the owner isn't trying to claw back that cost, who is going to rent the more expensive house? I'm also assuming we are not talking commercial here, but residential? You need to look at ways to minimise the land tax. It will cost you though. You could have your partner buy you out. Pay stamp duty, but that is a one off cost. Land tax is going to sting you every year. How do I know all this? We're in the same boat.
I assume since posted under "commercial property" the OP is talking commercial. If so, quite normal for the tenant to pay the LL's Land Tax - I see this almost always in commercial leases.
Consider future purchases. We like to buy in different names and different states. Each state you get a new threshold. It's also good for diversifying due to different property cycles in each state. By doing this you can own a huge amount of property but pay only minimal land tax. The other thing I'm going to do to minimise is once I've reached the land tax threshold for a state I will carefully consider any next purchase if it has enough upside to cover the land tax. And even buying townhouses and units instead of houses due to lower land tax on them PS only just realised this is commercial sorry!
Yes its common to pass on all lessor costs inc land tax to the lessee. Like everything its open to negotiation in the lease eg 100, 50%, 0% etc
Very common. Generally I find my commercial client's will spread their portfolio across multiple structures even with their CIP's - reducing the land tax, making it easier to ask for a higher base rent if the outgoings are contained.
You should speak to a good commercial solicitor or arrange a commercial PM at the very least to review your existing leases to see what else you have missed. A good commercial lease is worth its weight in gold.
