Modified Gross Lease
A lease structure where the tenant pays base rent plus some operating expenses, with the landlord covering the remainder—a middle ground between gross and NNN.
Definition
A Modified Gross Lease splits operating expenses between landlord and tenant based on negotiated terms. Unlike a gross lease (landlord pays all) or NNN lease (tenant pays all), modified gross allows flexibility in allocating costs. Common structures include base year stops (tenant pays expense increases above a baseline), category splits (landlord covers taxes and insurance while tenant pays utilities), or fixed CAM with annual escalations. Modified gross works well for smaller operators and tenants who prefer simpler billing than full NNN reconciliation.
Example
A tenant signs a modified gross lease at $14/SF base rent. The landlord covers property taxes and insurance, while the tenant pays utilities directly and a fixed $2/SF CAM charge that increases 3% annually.