how a modified gross lease works
commercial real estate leases can be categorized by two rent calculation methods gross and net the modified gross lease at times referred to as a modified net lease is a combination of a gross lease and a net lease modified gross leases are a hybrid of these two leases as operating expenses are both the landlord s and the tenant s responsibility with a modified gross lease the tenant takes over expenses directly related to his or her unit including unit maintenance and repairs utilities and janitorial costs while the owner landlord continues to pay for the other operating expenses the extent of each party s responsibility is negotiated in the terms of the lease which expenses the tenant is responsible for can vary significantly from property to property so a prospective tenant must ensure that a modified gross lease clearly defines which expenses are the tenant s responsibility for example under a modified gross lease a property s tenants may be required to pay their proportional share of an office tower s total heating expense 