What is modified gross lease?

A modified gross lease is a hybrid lease agreement that combines elements of both a gross lease and a net lease. In a modified gross lease, the tenant pays a base rent amount that covers the property taxes, building insurance, and common area maintenance (CAM) fees. However, the tenant is also responsible for paying for utilities and other operating expenses, such as janitorial services and trash removal.

Unlike a traditional gross lease where the landlord is responsible for all operating expenses, a modified gross lease allows for a more equitable sharing of costs between the landlord and tenant. This type of lease can benefit both parties as it provides a level of predictability for both the landlord and tenant in terms of expenses.

One potential advantage of a modified gross lease for tenants is that they have some control over their operating expenses, as they are responsible for managing their own utilities and other direct costs. For landlords, a modified gross lease can help attract tenants who are looking for a lease arrangement that provides a balance between fixed and variable expenses.

Overall, a modified gross lease offers a flexible lease structure that can be tailored to meet the needs of both landlords and tenants.