Tenant Stuck with Tax Escalation Clause It Agreed To

A lease's tax escalation clause “deemed” the tenant's proportionate share of any tax increases for the building was to be 6 percent. In 2003, the tenant's tax bill from the owner more than doubled. The owner refused to reduce the tenant's proportionate share of the increase. So the tenant sued the owner and asked the court to limit the tax escalation clause's application.

A New York court dismissed the lawsuit and said the tax escalation clause applied to the tenant. The court noted that the lease's tax escalation clause set out a clear formula for determining the tenant's share of tax increases, and the tenant had agreed to it. The court wouldn't consider the determination by the tenant's architect that the tenant's space was much less than 6 percent of the building's total area and that the tenant's obligation to pay 6 percent of the tax increase was unfair. The parties had deemed that 6 percent share. And a disclaimer in the lease said that percentage bore no relation to the size of the space compared to the size of the building. The court said that it wouldn't rewrite the lease to relieve the tenant of its bad deal [609 Corp. v. Park Towers S. Co., LLC].