ContractsCounsel Logo
Home Blog Modified Gross Lease vs Gross Lease

Jump to Section

ContractsCounsel has assisted 361 clients with modified gross leases and maintains a network of 188 real estate lawyers available daily. These lawyers collectively have 55 reviews to help you choose the best lawyer for your needs.

A gross lease is where the tenant has to pay a fixed rent, while in a modified gross lease, property expenses are divided between the tenant and the landlord. A gross lease is a kind of tenancy where the tenant is obliged to pay an unaltered amount of rent that encompasses all costs incurred with the premises, such as taxes, insurance premiums, and maintenance charges. The owner bears this burden, and therefore, there will be no other costs to worry about by the renter. It is commonly used in renting residential properties.

On the other hand, modified gross lease refers to another type where both tenants and landlords divide some of their property expenditures. This type of lease shows which liabilities should be borne by tenants and those assumed by lessors. Commercial houses are mostly let out on such terms.

California has adopted both types of leases, including gross leases and modified ones. Both landlords and tenants must study all stipulations within a lease before they sign it so that they know their responsibilities and duties well.

Differences Between Modified Gross Lease and Gross Lease

These two kinds of leases occur often in California, namely, modified gross leases versus gross leases. Here are some things that distinguish these types:

  • Sharing Costs: Under a gross lease agreement structure, landlords are required to foot all property running expenses, such as property taxes and insurance coverage; however, under a modified gross situation, cost sharing occurs between tenant and lessor, with clear outlines depicting who has what obligations at what point.
  • Flexibility: A modified gross arrangement offers more flexibility relative to its cousin, a full-service or even triple-net lease. For example, if a tenant needs changes on the premises, a Modified Gross Lease allows for them as long as the cost is covered by him, as he’s got the right to make modifications, unlike what could happen under a Gross Lease without the landlord’s approval.
  • Term Length: Gross leases are often used for more temporary lease terms, such as one year, while modified gross leases are commonly employed for longer lease terms, such as three to five years.
  • Rent Increases: A gross lease, on the other hand, might have a constant rent throughout the lease period. Otherwise known as a modified gross lease may involve an increase of rent during the term either through an escalation clause or being negotiated between landlord and tenant.

Moreover, if property-related costs are divided to each party differently in a modified gross tenancy and a basic or single net, it is not so. In comparison to more permanent leases for which they are best suited, modified gross leases offer more choices, while gross leases constitute shorter-term rentals featuring flat rents.

Factors in Choosing a Modified Gross Lease and Gross Lease

Whether to use a modified gross lease or a full-service/gross/net/landlords’ costs/space charge arrangement depends mostly on the need for analysis of both sides, i.e., landlords and tenants. Each type has some benefits and downsides. Therefore, factors like property kind, time length of contract completion as well as the financial position of every party should be critically examined before arriving at any decision regarding this issue.

Alternatively, residential properties or short-term leasing may prefer the use of gross leases, where all property-related costs are borne by the landlord in exchange for a fixed rent paid by the tenant. In that case, this form of leasing becomes less complex because much less bargaining occurs, and there are few chances of conflicts arising.

On another hand, commercial properties or longer lease terms could call for an amended tenant paying / cost-sharing basis/pro rata share/modified net/mixed/percentage rent basis where expenditure allocation alongside obligations can be discussed by tenants with owners. Hereby, this kind of agreement fosters flexibility among them yet promotes greater transparency about prices at once.

Finally, it is important to consult legal experts as well as finance professionals when making decisions between full-service/gross/net/landlords’ costs/space charge agreements and modified ones based on the tenant and landlord’s peculiar needs.

Meet some lawyers on our platform

Danny J.

13 projects on CC
CC verified
View Profile

Zachary J.

388 projects on CC
CC verified
View Profile

Michael K.

102 projects on CC
CC verified
View Profile

Ryenne S.

673 projects on CC
CC verified
View Profile

Key Terms for Modified Gross Lease vs. Gross Lease

  • Rent: The amount of rent that is payable by the tenant should be stipulated in the lease agreement. Likewise, there must be an indication of how it shall be paid, such as monthly basis every three months or even yearly. On a gross lease deal, rent will always be constant, covering all property-related expenses. On the other hand, within a modified gross lease arrangement, there might be variations in rental payment as reflected by expenses being borne by tenants.
  • Property Expenses: There is a need to identify who pays which property-related costs within the leasing documentation. Thus, when using a gross lease, the owner incurs all charges, but in the case of a modified gross lease, some expenses are shared between the two. Property tax rates, as well as insurance rates, are included under property expenditures.
  • Term Length: This means that the particular length of time until which an agreement is operative has been stated to enable planning by both parties about their finances and schedules. Generally, gross leases are applicable for much shorter periods, while modified gross leases may be used for longer periods.
  • Security Deposit: Also contained in a tenancy agreement is information on security deposit, like the amount that the tenant must remit and how it will be refunded at the end of the lease. Considered a norm, a security deposit is mostly used to cater for any destruction or unpaid rent that may occur after entering into the leasing contract till its maturity.
  • Maintenance and Repair: This includes the terms of the agreement between landlord and tenant.

Final Thoughts on Modified Gross Lease vs. Gross Lease

In California, there are two kinds of lease agreements used by landlords and tenants, perhaps in modified gross leases and gross leases. While both types have their pros and cons, there is a main distinction between them, which is the way property expenses are divided among lessors and lessees. While discussing gross lease agreements, in brief, we say landlords pay for any costs involved with the property as opposed to modified gross leases in which some of these expenses could be shared to allow for more flexible negotiation.

Some of the things that need to be taken into consideration when selecting between a modified gross lease and a gross lease are the nature of the property, the period over which the lease will run, and financial capability. In this regard, landlords and tenants should seriously evaluate their needs before seeking legal advice or consulting an accountant to identify a beneficial arrangement from their standpoint.

If you are looking to get free pricing proposals from vetted lawyers that are 60% less than typical law firms, you can Click here to get started. By comparing multiple proposals for free, you can save the time and stress of finding a quality lawyer for your business needs.


ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


Need help with a Modified Gross Lease?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,582 reviews

Meet some of our Lawyers

Fabian G. on ContractsCounsel
View Fabian
4.5 (2)
Member Since:
May 9, 2023

Fabian G.

Managing Attorney at Apex Legal Solutions PLLC
Free Consultation
Miami, Florida
3 Yrs Experience
Licensed in FL
University of Miami School of Law

Fabian graduated with honors from the University of Miami School of law, where he served as the articles and comments editor for the law school's Race and Social Justice Law Review. He received the John F. Evans Memorial Scholarship Award for excellence in the university's Litigation Skills Program and the HOPE Pro Bono award for completing more than one hundred (100) pro bono hours. Additionally, he received the CALI Excellence for the future award in Sports Law. He focuses his practice on corporate, real estate and immigration matters. Fabian has experience representing luxury hotel owners and operators in connection with the drafting of hotel management agreements, restaurant license agreements, and complex restaurant leases for domestic and international projects including: Nobu Tulum, Nobu Punta Cana, Nobu Orlando, Nobu Chicago and the Nickelodeon Hotel in Riviera Maya, Mexico, among others. He has represented clients in the commercial real estate industry in connection with the drafting of purchase and sale agreements, promissory notes, and mortgages. Lastly, Fabian routinely counsels corporate clients in connection with the drafting of articles of organization, operating agreements, and other documents related to acquisitions, restructurings and investments.

Zachary J. on ContractsCounsel
View Zachary
5.0 (238)
Member Since:
May 27, 2022

Zachary J.

Principal
Free Consultation
Crown Point, IN
5 Yrs Experience
Licensed in IL
The University of Michigan Law School

I am a solo-practitioner with a practice mostly consisting of serving as a fractional general counsel to growth stage companies. With a practical business background, I aim to bring real-world, economically driven solutions to my client's legal problems and pride myself on efficient yet effective work.

Amber M. on ContractsCounsel
View Amber
5.0 (13)
Member Since:
March 8, 2023

Amber M.

Attorney
Free Consultation
Oklahoma
9 Yrs Experience
Licensed in AZ, OK
J. Reuben Clark Law School

Amber Masters has over 9 years of experience as a contracts attorney, helping small businesses with an array of agreements, such as purchase agreements, master service agreements, and employment contracts. She has an extensive background in employment agreements for dentists, doctors, and other health care professionals. She is a highly rated and acclaimed estate planning attorney and personal finance expert, who has been featured on CNBC, NBC, and Yahoo Finance. She successfully launched and sold a fintech startup and can empathize with the issues small and mid-size businesses face. Licensed in Oklahoma and Arizona.

Michael O. on ContractsCounsel
View Michael
5.0 (4)
Member Since:
February 14, 2022

Michael O.

Managing Attorney
Free Consultation
Los Angeles
17 Yrs Experience
Licensed in CA, NY
University of Southern California

A corporate and commercial attorney with experience in transactional legal services including corporate and finance transactions, mergers and acquisitions, real estate, commercial contracts, bankruptcy, restructuring, international business transactions and general counsel services. Additional background skills and experience include investment banking, financial analysis, and commercial litigation. Sectors covered include technology, media, franchises, and business services providers, from start-ups to medium and large enterprises.

George F. on ContractsCounsel
View George
Member Since:
August 18, 2021

George F.

Attorney
Free Consultation
Astoria, NY
23 Yrs Experience
Licensed in NY
Fordham University School of Law

The Law Office of George K. Fuiaxis, from the very beginning in 2002, has built a reputation with its clients as an unmatched, diligent, hands on law practice that is always on duty to find the best course of action for its clients. With a supreme pledge of exceptional service to its clients in the areas of Real Estate (Commercial & Residential), Loan Modifications, Intellectual Property, Corporate Law & Business Transactions, Wills, Trusts & Estates, the Law Office of George K. Fuiaxis creates solutions for the many faceted problems faced by its clients. The office represents several various clients, including well known lending institutions, foreign and domestic corporations, sellers and buyers of residential and commercial real estate, residential and commercial landlords and tenants, well known restaurant and business owners, automobile dealerships, airline companies, well known fashion, sports and entertainment industry individuals and corporations, information technology (IT) startups and well known IT companies.

Chris J. on ContractsCounsel
View Chris
Member Since:
August 22, 2021

Chris J.

Outside Counsel
Free Consultation
Irvine, CA
29 Yrs Experience
Licensed in CA
Loyola Law School, Los Angeles

I'm a business law generalist with over 24 years of experience, including as in-house General Counsel, as outside counsel through my own firm and as an attorney in an Am Law 100 law firm. My employers and clients uniformly appreciate my ability to (i) negotiate and close transactions quickly and effectively, and (ii) to make the complex simple. Among other things, I can efficiently assist you on entity formation, governance, and structure; HR issues; mergers and acquisitions; and the negotiation and drafting of all types of commercial contracts. I'm the proud recipient of multiple Martindale-Hubbell Client Distinction Awards given only to the top 5% of attorneys for quality of service.

Gregory W. on ContractsCounsel
View Gregory
Member Since:
August 23, 2021

Gregory W.

Business Attorney
Free Consultation
Los Angeles
17 Yrs Experience
Licensed in CA
University of West Los Angeles

Strategic thinking business minded Outside General Counsel here to help you with your company. I have been able to help guide business owners from startup through series A, B, & C funding and ultimately IPO's. Regardless of your plans I am here to help you succeed as you grow your business.

Find the best lawyer for your project

Browse Lawyers Now

Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.

View Trustpilot Review

Need help with a Modified Gross Lease?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,582 reviews
CONTRACT LAWYERS BY TOP CITIES
See All Real Estate Lawyers

Contracts Counsel was incredibly helpful and easy to use. I submitted a project for a lawyer's help within a day I had received over 6 proposals from qualified lawyers. I submitted a bid that works best for my business and we went forward with the project.

View Trustpilot Review

I never knew how difficult it was to obtain representation or a lawyer, and ContractsCounsel was EXACTLY the type of service I was hoping for when I was in a pinch. Working with their service was efficient, effective and made me feel in control. Thank you so much and should I ever need attorney services down the road, I'll certainly be a repeat customer.

View Trustpilot Review

I got 5 bids within 24h of posting my project. I choose the person who provided the most detailed and relevant intro letter, highlighting their experience relevant to my project. I am very satisfied with the outcome and quality of the two agreements that were produced, they actually far exceed my expectations.

View Trustpilot Review

Need help with a Modified Gross Lease?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,582 reviews

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city