A Modified Gross Lease (also known as a Modified Net Lease) is a type of commercial lease where both the landlord and tenant share some of the property’s operating expenses.
Under a Modified Gross Lease, the tenant typically pays the base rent, and the landlord and tenant negotiate which of the common operating expenses will be covered by the tenant. These expenses can include utilities, property taxes, insurance, and maintenance, among others.
The specific arrangement can vary widely between different Modified Gross Leases. Some may require the tenant to cover only specific utilities, while others might include other costs such as maintenance or property taxes. Because the division of expenses is negotiable and can be tailored to the specific needs and desires of the landlord and tenant, Modified Gross Leases offer a certain degree of flexibility.
This lease type can provide benefits to both parties. The landlord has assurance that some operating expenses are covered, and the tenant might find this type of lease to be more transparent compared to a Triple Net Lease, where the tenant is responsible for almost all operating costs.
The details of a Modified Gross Lease should be clearly outlined in the lease agreement to avoid any confusion or disputes regarding who is responsible for what expenses. This can include defining exactly what expenses are covered, how they are calculated, and any conditions or limits on those expenses.