Fall 2023

Privately owned buildings in the US are assessed property taxes. The property owner is responsible for prompt payment of those taxes. In the vast majority of private sector commercial leases, the tenant is ultimately responsible for paying the property taxes, either through special payments or as part of rent.


In the case of leases with the USPS, the property owner (the lessor) is responsible for paying the property taxes. Some lessors have leases that provide for reimbursement of those tax payments, and some lessors have leases that don’t. For leases that do not require the USPS to reimburse property taxes, lessors should be sure to factor in property tax costs when determining the rent required to cover the lessors’ expenses and provide a sufficient return.
For lessors whose property taxes are reimbursed, a Tax Rider Reimbursement of Paid Taxes (called a “Tax Rider” here) will be part of the lease. This Rider sets out the responsibilities of each party, the tax expenses that will and will not be reimbursed, how and when the reimbursement request is to be made, and where the reimbursement request is to be sent.

Lessor Responsibilities

The lessor agrees in the lease to pay all taxes of any kind, including Real Property Taxes, and fees of every kind and nature levied on the Premises.


USPS Responsibilities


The Postal Service will reimburse Landlord 100% of the total paid Real Property Taxes in accordance with the Rider.

It sounds simple, but there are always rules and exceptions to the rules. So, let’s look at what is excluded.


Expenses Excluded from Reimbursement

The Rider states that no reimbursement will be made for “fines, penalties, interest or costs imposed for late payment.” Therefore, fees the taxing authority charges to a lessor for paying taxes late will not be reimbursed by the USPS. In addition, the USPS is entitled to any tax exemptions or abatements that may be available for the property. If a lessor fails to claim any such available exemption or abatement, the USPS has a right to recover from the landlord the amount of tax that would have been avoided by taking advantage of the exemption or abatement, plus any administrative costs and/or interest. Such recovery can be from future rent payments.

Another situation where the USPS may fail to reimburse 100% of the paid taxes, is if the lessor fails to “promptly furnish” to the USPS “copies of all notices that may affect the valuation of the Premises for Real Property Tax purposes.” “Promptly,” in this situation, is defined as delivery to
the USPS (at the required address for delivery of lease notices) within 10 calendar days of the lessor’s receipt of the notice. If a lessor receives a property Valuation notice on October 15, 2023, a copy of that Notice should be delivered to the USPS as required by the lease by October
25, 2023.


If a lessor appeals the property taxes (usually due to an improper property valuation) and obtains a reduced tax amount, the Postal Service is entitled to the Tenant’s Share of the value of any such reduction. However, the Postal Service will not reimburse the lessor for expenses, penalties, costs, and legal expenses in connection with any protest or appeal proceeding.


Two additional points to remember: The USPS will reimburse only the taxes that correspond to the period the lease is in effect. Taxes attributable to a part of a year when the lease is not in effect will not be reimbursed. In addition, if a postal facility is in part of a building that also houses other tenants, such as a strip mall, the Postal Service will only reimburse taxes attributable to the portion of the building the USPS leases.


When to request Reimbursement of Taxes


Section 9 of the Tax Rider in USPS leases provides that lessors will “submit a request for reimbursement of taxes within 18 months after the date of payment by Landlord.” After that 18 month period expires, the Postal Service is no longer required to reimburse the taxes which would have been covered by the reimbursement request. That doesn’t mean there is no chance those taxes will be reimbursed. There have been situations where reimbursement has occurred after a delinquent request. However, lessors should not test fate and count on that.


What is Required for Submitting a Tax Reimbursement?


The Postal Service will reimburse taxes on an individual property once a year. Once. If a property has multiple taxing authorities sending separate invoices, combine the bills and ask for one reimbursement per year.

  • Requests for reimbursement must include copies of the front and back of the complete tax bill along with proof of payment. Reimbursement only happens after the taxes are paid.
  • The tax bills must identify the Premises being taxed. Generally, this is shown by a parcel number.
  • The proof of payment must be any one of the following: (i) a receipt for payment shown on the face of the tax bill, (ii) a copy of the front and back of the canceled payment check, (iii) a statement from a lender verifying payment of the tax, or (iv) other documentation reasonably satisfactory to the Postal Service.
  • Requests for reimbursement must include the city, state, and Postal Service facility ID # as shown on the lease.
  • Reimbursement requests are to be sent to the address specified in the Tax Rider. Requests must be in writing and sent by United States mail, certified postage prepaid, or by Priority Mail Express (overnight). Notice is deemed to have been given three days after the date of the certified mailing, or the next business day after being sent by Priority Mail Express.

Requests that are incomplete or improper will be returned to the lessor without payment.

Reading the Tax Rider and following the instructions for submittal before asking for reimbursement saves time and minimizes frustration.