Modified Gross Lease: What t Is and How it Works
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Operating a commercial real estate property requires attention to detail and knowledge of the industry. One of the most important aspects of managing commercial real estate is signing a lease agreement. Most commercial lease agreements require both landlords and tenants to pay operational and maintenance expenses on a recurring basis.
This article provides a detailed overview of a modified gross lease and covers the most important aspects of managing commercial properties.
What is a Modified Gross Lease?
A modified gross lease is a commercial lease agreement where both tenant and landlord are responsible for paying ongoing expenses associated with the property. The expenses paid by landlord and tenant tends to vary on a case-by-case basis, and they have to be negotiated by a tenant and landlord before both parties sign a lease.
A modified gross lease is common for commercial properties with more than one tenant. It typically stipulates that a tenant is responsible for paying the base rent as well as some other expenses that are associated with the property such as utilities, insurance and property taxes. Other costs, including maintenance and upkeep, are generally covered by a landlord.
There are several types of commercial real estate leases such as net lease, double net lease, gross lease and modified gross lease, and it’s important to know the difference between them because it allows both parties to understand the lease structure.
Remember that although these lease terms are considered universal, they could also have different interpretations depending on who your landlord is or what country you are in.
Here’s an article about a modified gross lease and how it works.
Why Hire a Commercial Lease Lawyer?
A modified gross lease is a legal document that has to be carefully reviewed before both parties sign it. A modified gross lease is a commercial lease that is different from a standard residential lease and can be confusing to someone who has never signed this type of agreement before.
Keep in mind that any expenses could be negotiated prior to signing a commercial lease, not everything is up for negotiation. The most commonly negotiated expenses include:
- Utilities
- Miscellaneous repairs and expenses
- Common area maintenance (more often referred to as CAM)
- Property insurance
Understanding a modified gross lease could require additional explanation, which is why if you are a tenant, consulting with a commercial lease lawyer is always a good option before signing a commercial lease agreement.
A commercial lease lawyer could help you to properly interpret and coach you on how to negotiate a commercial lease before signing it.
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Modified Gross Lease vs Triple Net Lease
Commercial real estate leases fall in two categories: gross and net. The modified gross lease (also referred to as a modified net lease) is a mix of a gross lease and a net lease.
Modified gross leases are a hybrid of these two leases, as expenses covered by both tenants and landlords. With a modified gross lease, the tenant pays expenses directly related to their leased space, including maintenance and repairs, utilities, and general upkeep costs, while the owner/landlord continues pays for the other operating expenses.
Unlike a modified gross lease where the landlord and tenant share operational expenses, a triple net lease is the type of lease under which a tenant pays all operational expenses associated with the property. Triple net lessees are common for big properties such as shopping malls and restaurants.
A triple net lease is considered simpler than a modified gross lease because the reimbursements structure under a modified gross lease can fluctuate and can be difficult to understand, especially for someone who has never operated in commercial real estate.
How Does a Modified Gross Lease Work?
A modified gross lease falls between a net lease, which passes on property expenses to the tenant and a gross lease, where the landlord pays for operating expenses.
The conditions of a modified gross lease depend on several factors such as:
- the type of building
- the number of tenants
- landlord’s requirements
In some cases tenants could be required to pay for maintenance expenses and cleaning services, while the landlord is responsible for major renovations and property taxes. A modified gross lease usually implies that a tenant covers utility bills and cleaning.
Additionally, a modified gross lease could have extra conditions specifying the cost of maintenance for the first couple of years. For example, a tenant could sign a modified gross lease stipulating that the operational costs will not increase for the first couple of years and that after that, an increase would have to be covered by the tenant.
Here’s an article about how modified gross lease works.
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Pros of a Modified Gross Lease
There are many pros to a modified gross lease which make it an excellent option for those tenants who can’t choose between various commercial real estate extremes of gross and net leases. A modified gross lease is generally a good choice for both tenants and landlords, as it gives landlords control over certain responsibilities and gives tenants control over the costs that they can control.
Below are some of the pros of a modified gross lease:
- More Transparency. A modified gross lease creates more transparency as it allows tenants to audit the expenses associated with the lease and requires landlords to reimburse any charges if a lease is not structured fairly.
- Simple Structure. A modified gross lease is considered a simple structure that allows little window for charging tenants additional expenses.
- Less Responsibility for Maintenance. One of the biggest advantages of a modified gross lease for tenants is the lack of responsibility for the maintenance of the building. This allows corporate tenants to spend more time managing their business operations rather than worry about hiring the right people to do maintenance of the building. This provision allows tenants to focus more on their business.
- More Control Over Budget. Under a modified gross lease, tenants typically have more control over the expenses that directly affect their business such as taxes, rent and salaries. This happens because a modified gross lease requires a landlord to cover maintenance of the building.
Cons of a Modified Gross Lease
Below are some cons of a modified gross lease you should know:
- Limited Control. Lax maintenance on the landlord’s side could be detrimental to the tenant's business. If a landlord neglects to maintain a property in a timely manner, it will likely affect the appearance of the building. For example, if a building begins to deteriorate or look unkempt, it could potentially deter potential customers and put corporate tenants in a bad light.
- Fluctuation. Costs could fluctuate significantly under a modified gross lease. That’s why it’s not uncommon for a modified gross lease to have a provision specifying that the lease stays the same under the first year or two. Changes in the lease could have a significant impact on tenants, especially small businesses and start-ups who have limited budgets. Additionally, landlords could overestimate some of the operating costs of the businesses and pass them on to a tenant.
Get Help with a Modified Gross Lease
A modified gross lease is the most common type of lease in commercial real estate, as it tends to evenly distribute responsibilities between landlords and tenants. As a tenant, you are responsible for paying rent as well as operating costs and janitorial expenses, as well as any increases in property taxes. A landlord typically covers insurance, taxes, and property management.
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Meet some of our Modified Gross Lease Lawyers
Fabian G.
Fabian Garcia Villanueva is the Managing Attorney and Founder of GV Law PLLC, a premier boutique law firm delivering Big Law level representation to clients across corporate, transactional, and regulatory matters. At GV Law, Mr. Garcia leads a multidisciplinary team that advises business owners, investors, and professionals on complex transactions, strategic growth initiatives, and compliance across multiple sectors including healthcare, finance, real estate, technology, and international business. The firm handles everything from business formations and cross-border transactions to mergers and acquisitions, private offerings, commercial agreements, and ongoing legal operations support. Known for precision, strategic thinking, and relentless attention to detail, Mr. Garcia brings the rigor of top-tier law firms into a modern, agile practice. GV Law’s clients include emerging ventures, established corporations, and high-net-worth individuals seeking first-class legal partnership built on trust, efficiency, and results.
"Good work, on time, good communications - very smooth process."
Amber M.
Amber Masters has 11 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 assisting health care providers through practice transitions including 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.
"Amber did an amazing job. She was fast and thorough. She saved me from making a potentially grave mistake being a new business owner. I am so very appreciative. I LOVE the 5 start quality services you provide. I was a bit nervous about the online service. It saved me so much time, and was well worth the cost. I definitely recommend Amber. If you are hesitant, I hope my honest review will ease that. I am a real person."
Joshua B.
Josh Bernstein has been serving real estate and corporate transactional clients since 2002. His experience is varied, and he enjoys working on and puzzling out novel and complex corporate and real estate matters. Josh’s experience includes, among other things, the following: representation of public companies in connection with SEC reporting and compliance work (proxies, 10-K’s; 10-Q’s; 8-K’s, etc.); representation of public and private company securities issuances (including private placements, and other similar offerings); assistance in structuring and drafting joint ventures, both for investors and operating partners, and including both real estate and corporate ventures; handling public and private company mergers and acquisitions; and asset sales and dispositions; assisting clients, big and small, with real estate acquisitions, sales and financings; managing large-scale and multi-state real estate portfolio acquisitions, dispositions and financings; complex condominium creation, structuring and governance work, including: commercial condominiums, use of condominiums as a land planning tool, wholesale condominium property acquisitions and dispositions, and rehabilitating failed or faulty condominium legal structures to make ready for sale; development of restrictive covenants and owners’ association documents for master-planned communities; compliance with federal statutes governing real estate sale and development (including, without limitation, the Interstate Land Sales Full Disclosure Act, the Housing for Older Persons Act, and the Americans with Disabilities Act); representation of real estate lenders, for both improved and unimproved property, and including numerous construction financings secured by real estate; assistance with commercial leasing; from both the landlord and tenant side, and including condominium leasing; training residential home and condominium sales staff for compliance with applicable local and federal law; and workouts of all kinds. When he’s not busy lawyering, Josh may be found watching 80’s commercials, flying a single-engine plane, playing poker, or trying to be a good dad.
"Josh has been extremely helpful sorting through issues with a tenant."
Hunter M.
Before law school I built the contract management system for a publicly traded medical device company — so I read your agreement the way the people who have to live with it will, not just the way a court would. I draft and review business contracts on a fixed fee, with the delivery date agreed before I start. You get the redlined document plus a short written summary of what I changed, why it matters, and what I'd push back on if the other side objects. Revisions are included — I'd rather get the document right than count rounds. NDAs, MSAs and SOWs, contractor and employment agreements, SaaS terms, terms of service and privacy policies, operating agreements, vendor and construction contracts, and full contract review with a plain-English risk summary. Send me the document and what you're trying to accomplish with it, and I'll come back with a fixed fee and a date.
"Highly recommended! The responses were incredibly fast, clear, and detailed. I’m extremely happy with the results."
Matt B.
Matt practices law in the areas of commercial finance, contract law, business & corporate law, and residential and commercial real estate (with a particular emphasis on retail shopping centers and office buildings). He has extensive experience in negotiating and structuring complex commercial loan, asset acquisition, asset disposition, leasing and real estate transactions. Matt additionally works on various general matters for clients such as forming LLCs and corporations, preparing various LLC and corporation documents and drafting and reviewing various types of contracts and agreements for clients and providing advice regarding same. Matt provides clients with extensive and timely communication on their matters and ensures that his clients are well represented and highly satisfied with their legal representation and the work product provided. Matt offers all potential clients a free initial consultation to discuss their legal matters prior to engaging his firm to represent them. Prior to opening his law firm Matt worked for many years in the New York City office of a large international law firm where he counseled large multi-national businesses, financial institutions, investment groups and individuals on highly sophisticated business, financial and real estate transactions. Matt provides his clients with diligent legal representation on their matters with a very personal approach.
"Working with Matt Bales (Bales & Bales, P.A. | Florida) on our corporate domestication to Florida was a wonderful experience. Matt demonstrated Professionalism, Patience, and Precision, complemented by Clarity, Commitment and Courtesy throughout the engagement. His responsiveness, attention to detail and practical approach made a complex transition feel remarkably seamless. A pleasure working with Matt, and I would gladly recommend him to anyone seeking thoughtful and dependable corporate legal counsel. CEO | Global Business & Technology Advisory Firm"
Harry N.
Experienced business advisor and in-house counsel with extensive litigation experience, representing parties in a variety of complex commercial disputes, including securities, financial fraud, contract, and antitrust litigation.
"Again, really thorough in his lay out and analysis. I'm looking forward to working with him again!"
Corey P.
I represent developers, investors, homebuilders, and hospitality brands in complex real estate transactions spanning the full life cycle of asset ownership—from acquisition and financing to development, leasing, management, and disposition—across a wide range of asset classes, including vacant land, residential communities, hospitality, multifamily, office, and mixed-use projects. Clients rely on me for practical guidance and efficient deal management. Beyond transactional work, I assist hospitality brands and real estate brokerages with regulatory compliance, advising on timeshare, condominium, community association, and brokerage licensing laws. My approach is rooted in understanding each client’s business and strategic goals. I help move deals forward by anticipating risks, identifying solutions, and serving as a collaborative partner as clients build, expand, and manage their real estate portfolios. My aim is to serve not just as outside counsel, but as a trusted advisor who supports clients in executing their vision and strengthening the long-term value of their assets.
"Corey is the best. Really worked hard on what I needed. 10/10!"
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Commercial lease review for a physical therapy clinic in Chapel Hill, NC
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