A modified gross lease is a type of lease agreement commonly used in commercial real estate where the landlord and tenant share some of the costs associated with the property. In a modified gross lease, the tenant pays a fixed rent amount plus a portion of the operating expenses associated with the property, such as property taxes, insurance, utilities, and maintenance costs.
Unlike a triple net lease, where the tenant is responsible for all operating expenses, and a gross lease, where the landlord is responsible for all operating expenses, a modified gross lease allows for a shared responsibility between the landlord and tenant.
The specific terms of it can vary depending on the landlord and tenant’s negotiation. Typically, the tenant will pay a base rent amount and then contribute an additional amount towards operating expenses, which may be a fixed amount or a percentage of the total operating expenses.
One advantage of it for the landlord is that it can provide a more predictable stream of income, as the tenant is responsible for some of the operating expenses. For the tenant, it can provide a level of cost control, as they know what their base rent will be and can budget for the additional operating expenses.
It’s important for both landlords and tenants to carefully review and negotiate the terms of a modified gross lease to ensure that the responsibilities and costs are clearly defined and agreed upon. Overall, a it can be a beneficial arrangement for both parties, providing a shared responsibility for operating expenses and a level of predictability in rental income and expenses.