Tax Escalator Clause

If you have a lease, one way that a landlord can raise your rent before the term of your lease ends is through what is called a "tax escalator clause." A tax escalator clause says that if your landlord's property taxes go up, she can increase your rent.

Back when property taxes were going up rapidly, these clauses were a way for landlords to raise the rent.

If your landlord does demand a payment from you under a tax escalator clause, you should: (1) read your lease to see whether the clause is legal; and (2) make sure the landlord is not overcharging you.

Note

In 1980, Massachusetts passed "Proposition 2½," which required towns and cities to limit the amount by which they could increase property taxes.¹⁸ Your landlord's property taxes, however, can still go up.

Is the Clause Legal

The law requires that tax escalator clauses be written in a certain form.¹⁹ If yours is not, it may be illegal and your landlord may not be able to raise your rent. The language of a tax escalator clause must contain three things:

1. A statement that you are obligated to pay only that portion of the increased property tax as your apartment bears to the whole property being taxed. For example, if you live in a three unit building and the units are all the same size, you would be obligated to pay only one third of the increase for the whole building.
2. The exact percentage of any tax increase that you are obligated to pay.
3. A statement that if your landlord gets a tax refund, or tax abatement, you will receive a proportionate share of that reduction (less any lawyer's fees that the landlord paid in getting the reduction). For example, if the city sends your landlord a refund after she has already paid her taxes, you would be entitled to a proportionate reduction in rent.²⁰

Read the text of your lease carefully. If your lease has a tax escalator clause that clearly does not contain all three items above, the clause is illegal and your landlord cannot use it to increase your rent.²¹

Is the Landlord Overcharging You

If the tax escalator clause is legal, you still need to make sure that your landlord is not overcharging you. Go to your local tax assessor's office and ask there whether taxes on the property you rent have gone up and whether your landlord got an abatement. Abatements are reductions that property owners get after they pay their taxes and the tax assessor determines that the original tax assessment was too high.

If the taxes have gone up, find out by how much and then figure out whether your landlord calculated your increase correctly. If your landlord has received a tax abatement, you will need to figure out how much the landlord owes you.