Texas BOMA has requested that I draft a “tax substitution” clause that could be used by its members as an example when preparing or updating their form leases. Please note that every form lease is different, and you must have this clause reviewed by your own attorney for compatibility with your specific lease and business transaction. The following clause does not constitute legal advice to any individual Texas BOMA member, and is provided by way of example only.

Subject to the foregoing caveat, you should consider including language similar to the bold “provided, however” language set forth below.

For the purposes of this Lease, "Operating Expenses tc "Operating Expenses " \l 2" for any calendar year shall mean all (or where specified by Landlord as hereinafter permitted or required, an amortized portion of all) expenses, costs and accruals of every kind and nature, computed on an accrual basis, incurred or accrued in connection with, or relating to, the ownership, maintenance, or operation of the Property and related assets, during such year, including, but not limited to, the following:

(__) all taxes, assessments and governmental charges of any kind or nature, whether or not directly paid by Landlord, whether federal, state, municipal, local or other, and whether they be by taxing districts or authorities presently taxing the Property or such other land or facilities or by others subsequently created or otherwise, and any other taxes, assessments and governmental changes attributable to the Property or such other land or facilities or their operation, excluding taxes and assessments attributable to the personal property of other tenants, federal and state taxes on income, death taxes, and any taxes imposed or measured on or by the income of Landlord from the operation of the Property or such other land or facilities; provided, however, that if at any time during the term of this Lease, the present method of taxation or assessment shall be changed such that the whole or any part of the taxes, assessments, or governmental charges now levied, assessed or imposed on real estate, improvements or personal property shall be discontinued or reduced, in whole or in part, and as a substitute therefor, or in lieu of or in addition thereto, taxes, assessments, or governmental charges shall be levied, assessed or imposed, wholly or partially, on (or shall be calculated with reference to) the rents received from the Property or such other land or facilities, or the rents reserved herein, or the income of Landlord in respect of the Property, such other land or facilities, or any such rents, then such substitute, additional or increased taxes, assessments, or governmental charges, to the extent so levied, assessed or imposed, shall be deemed to be included within the Operating Expenses. Consultation, legal fees and costs in connection with any challenge of tax assessments as reasonably allocated by Landlord shall also be included in Operating Expenses. Tenant will be responsible for and shall timely pay all ad valorem taxes on its personal property and on the value of the leasehold improvements in the Leased Premises to the extent that the same exceed Building Standard (and if the taxing authorities do not separately assess Tenant's leasehold improvements, Landlord may make a reasonable allocation of the ad valorem taxes allocated to the Property and such other land and facilities, to give effect to this sentence). In the case of special taxes and assessments which may be payable in installments, only the amount of each installment accruing during a year shall be included in the Operating Expenses for such year.