A commercial tenant sought declarations regarding the proper method for allocating property taxes under a shopping plaza lease and the proper allocation of tax shortfalls arising from statutory tax-capping rules between 2001 and 2008.
The court interpreted the lease to require use of MPAC valuation records (“working papers”) as the primary method of allocating property taxes rather than a proportionate-share-by-square-footage approach.
The court also addressed the landlord’s allocation of tax shortfall created by legislative caps, holding that the landlord’s historical allocation was arbitrary and lacked a principled basis.
Preferring the methodology of the tenant’s expert, the court held that shortfall should be allocated proportionately among eligible tenants, including uncapped shortfall tenants.
The tenant was therefore entitled to recalculation of taxes and potential refunds or credits based on the correct methodology.
