Jump to Section
Need help with a legal contract?
Post Your Project (It's Free)
Get Bids to Compare
Hire Your Lawyer
A modified gross lease is a type of commercial lease agreement that combines aspects of both gross and net leases. It is a commercial lease agreement commonly used in California. The terms of a modified gross lease can vary depending on the agreement between the landlord and tenant. Understanding the key features and considerations before entering into this lease agreement is important.
Essential Elements of a Modified Gross Lease
A modified gross lease is a hybrid between a gross lease and a net lease, with some of the costs and responsibilities of the property divided between the landlord and tenant. Here are the key points to understand about modified gross leases in California:
Rent and Expenses
Under a modified gross lease, the tenant pays a base rent covering some, but not all, property expenses. The tenant is also responsible for paying some property expenses, including utilities, maintenance, taxes, and insurance. The lease agreement will outline the exact expenses and how they are divided between the landlord and tenant.
Modified gross leases are often more flexible than other commercial leases. This is because the landlord and tenant can negotiate the specific terms and responsibilities of the lease, including the rent and expenses, to suit their individual needs best.
Maintenance and Repairs
The lease agreement should specify which party is responsible for the maintenance and repairs of the property. Generally, the landlord is responsible for structural repairs and improvements, while the tenant is responsible for maintaining and repairing their leased space.
Under a modified gross lease, the tenant may be responsible for paying a portion of the utilities for the property, such as electricity, water, and gas. The lease agreement should outline which utilities the tenant is responsible for and how the expenses will be divided.
In some cases, the tenant may be responsible for a portion of the expenses related to common areas of the property, such as parking lots, elevators, and shared bathrooms. The lease agreement should specify which common areas the tenant is responsible for and how the expenses will be divided.
Advantages and Disadvantages of Modified Gross Lease
There are several advantages and disadvantages when deciding whether a modified gross lease is right for your commercial property in California.
A modified gross lease offers more flexibility than other commercial leases because the landlord and tenant can negotiate the specific terms and responsibilities of the lease. This allows both parties to tailor the agreement to meet their individual needs.
The tenant is responsible for paying some property expenses, including utilities, maintenance, taxes, and insurance. This shared expense structure can benefit the landlord and tenant by spreading the costs.
Lower upfront Costs
The base rent for a modified gross lease is typically lower than that of a triple net lease, which requires the tenant to pay all property expenses.
Lack of Predictability
Because the expenses are shared between the landlord and tenant, it can be difficult to predict the exact costs associated with the property. This can make it harder to budget and plan for the future.
Responsibility for Expenses
The tenant is responsible for paying a portion of the property expenses, which can add up over time. If the tenant cannot pay their share of the expenses, it can create financial issues for both the landlord and the tenant.
The tenant may be responsible for some property expenses, including insurance. This increases the liability for the tenant, as they may be responsible for any damages or injuries on the property.
Overall, a modified gross lease can be a good option for California commercial property owners and tenants. Still, it is important to consider the terms and responsibilities outlined in the lease agreement before agreeing.
Modified Gross Lease vs. Other Leases
In California, there are several different types of commercial leases, each with its advantages and disadvantages. The most common commercial leases are gross, triple net, and modified gross leases. Here are some of the key differences between modified gross leases and other lease types:
Under a gross lease, the landlord is responsible for paying all property expenses, including utilities, maintenance, taxes, and insurance. The tenant pays a fixed monthly rent, which includes these expenses. In contrast, the tenant and landlord share the expenses under a modified gross lease.
Triple Net Lease
Under a triple net lease, the tenant is responsible for paying all property expenses, including utilities, maintenance, taxes, and insurance. This can make the base rent lower than other lease types. In contrast, the tenant only pays a portion of the expenses under a modified gross lease.
Under a percentage lease, the tenant pays a base rent plus a percentage of their sales to the landlord. This can be a good option for businesses with high sales volume. In contrast, the rent is typically fixed under a modified gross lease and does not depend on sales volume.
A full-service lease is similar to a gross lease in that the landlord is responsible for paying all property expenses. However, a full-service lease may include other amenities like janitorial services or security. In contrast, a modified gross lease only includes shared expenses.
- Rentable Square Footage: The measurement used to determine the amount of rent due from a tenant based on the property's total square footage.
- Base Rent: The fixed rent that a tenant pays the landlord on a monthly or annual basis.
- Common Area Maintenance (CAM): Expenses associated with maintaining and repairing common areas of a property, such as hallways, parking lots, and elevators.
- Tenant Improvements (TI): Changes made to the leased space by the tenant to meet their specific needs.
- Operating Expenses: The costs of operating and maintaining a property, such as utilities, property taxes, insurance, and repairs and maintenance.
- Gross-Up: A method used to calculate the tenant's share of operating expenses by estimating the expenses as if the property were fully occupied.
- Pass-Throughs: The expenses passed from the landlord to the tenant, such as property taxes, insurance, and utilities.
- Escalation: The rent increases over the lease term, typically to account for inflation or changes in operating expenses.
A modified gross lease in California is a type of commercial lease that combines elements of both gross and net leases. Under a modified gross lease, the tenant and landlord share certain expenses related to the property, with the lease's specific terms negotiated and agreed upon by both parties.
Modified gross leases in California typically include a base rent amount and additional expenses such as property taxes, insurance, and maintenance costs. The exact details of these expenses, as well as how they are split between the tenant and landlord, can vary depending on the lease's specific terms.
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.
Meet some of our Modified Gross Lease Overview Lawyers
September 21, 2022
Current practice includes: employment law, family law, business law and personal injury.
September 22, 2022
I have been practicing law exclusively in the areas of business and real estate transactions since joining the profession in 2003. I began my career in the Corporate/Finance department of Sidley's Los Angeles office. I am presently a solo practitioner/freelancer, and service both business- and attorney-clients in those roles.
October 11, 2022
My name is Ryenne Shaw and I help business owners build businesses that operate as assets instead of liabilities, increase in value over time and build wealth. My areas of expertise include corporate formation and business structure, contract law, employment/labor law, business risk and compliance and intellectual property. I also serve as outside general counsel to several businesses across various industries nationally. I spent most of my early legal career assisting C.E.O.s, General Counsel, and in-house legal counsel of both large and smaller corporations in minimizing liability, protecting business assets and maximizing profits. While working with many of these entities, I realized that smaller entities are often underserved. I saw that smaller business owners weren’t receiving the same level of legal support larger corporations relied upon to grow and sustain. I knew this was a major contributor to the ceiling that most small businesses hit before they’ve even scratched the surface of their potential. And I knew at that moment that all of this lack of knowledge and support was creating a huge wealth gap. After over ten years of legal experience, I started my law firm to provide the legal support small to mid-sized business owners and entrepreneurs need to grow and protect their brands, businesses, and assets. I have a passion for helping small to mid-sized businesses and startups grow into wealth-building assets by leveraging the same legal strategies large corporations have used for years to create real wealth. I enjoy connecting with my clients, learning about their visions and identifying ways to protect and maximize the reach, value and impact of their businesses. I am a strong legal writer with extensive litigation experience, including both federal and state (and administratively), which brings another element to every contract I prepare and the overall counsel and value I provide. Some of my recent projects include: - Negotiating & Drafting Commercial Lease Agreements - Drafting Trademark Licensing Agreements - Drafting Ambassador and Influencer Agreements - Drafting Collaboration Agreements - Drafting Service Agreements for service-providers, coaches and consultants - Drafting Master Service Agreements and SOWs - Drafting Terms of Service and Privacy Policies - Preparing policies and procedures for businesses in highly regulated industries - Drafting Employee Handbooks, Standard Operations and Procedures (SOPs) manuals, employment agreements - Creating Employer-employee infrastructure to ensure business compliance with employment and labor laws - Drafting Independent Contractor Agreements and Non-Disclosure/Non-Competition/Non-Solicitation Agreements - Conducting Federal Trademark Searches and filing trademark applications - Preparing Trademark Opinion Letters after conducting appropriate legal research - Drafting Letters of Opinion for Small Business Loans - Drafting and Responding to Cease and Desist Letters I service clients throughout the United States across a broad range of industries.
September 22, 2022
I have a background in Criminal Law, Family Law, Contract Law, and Environmental Law. I also have five (5) degrees in the following: Here are my degrees and background: 1) B.S. in Environmental, Soil, and Water Sciences 2) A.S. in Pre-Medical Sciences (anatomy, physiology, medical terminology) 3) A.S. in Aircraft Non-Destructive Inspection (science of x-rays, cracks in metal, liquid penetrant, magnetic particle inspections, ultrasonic inspections, and spectrophotometric oil analysis) 4) Master's in Natural Resources Law Studies (1 year focus in the environmental and pollution laws (Hazardous Waste Laws such as RCRA, CERCLA, FIFRA, Natural Resource laws such as ESA, CWA, CAA, FWPCA, Environmental Law, Sustainable Development, and Global Climate Change issues) 5) Juris Doctor and certificate in Native American Law
September 22, 2022
I am a lawyer in Glendale, Arizona. I have practiced in contract work including buy/sell agreements, contracts for the purchase of goods and services and real estate. I also practice in bankruptcy law and sports and entertainment law.
September 30, 2022
Gregory S. Davis is a native of New York and is a graduate of the Norman Adrian Wiggins School of Law at Campbell University. He also holds an undergraduate degree in Economics from the Wharton School at the University of Pennsylvania and an MBA from Bowie State University. Prior to entering the practice of law, Greg was a Trust officer for one of the largest U.S. Banks, an adjunct professor of finance at Meredith College and a Series 7 licensed financial advisor. Greg is currently the owner of The Law Office of Gregory S. Davis, PLLC (gsdavislaw.com) focusing on Estate Planning, Real Estate and Business Law. Greg is also an adjunct professor of Business Law at Wake Tech.
October 14, 2022
Hi there. I am a dual qualified (Illinois; England & Wales) transactional lawyer with about 6 years of legal experience. I'm very commercial and pragmatic in my approach, and I provide clear and timely service. I have worked in two of the top international "big law" firms focusing on corporate, private equity, insurance and financial services work. I'm now working in-house and have a wide range of experience with commercial and corporate contracts as well as legal and regulatory research.