What does Modified gross mean?

In Leasing Property - Asked by Nathan C. - Apr 9, 2010
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Answer(s)

Rod A.
Lender/Mortgage Broker
Tampa, FL

Typically, Modified Gross means, that the Owner or Landlord, is responsible for the major expense items, but the tenant is responsible for their directly related expenses. Below would be typical but you can negotiate differences:
Expense
RE Taxes: Owner
Property Insurance: Owner
Structural: Owner
Exterior Maintenance: Owner
Common Area Exps: Owner
Unit/Interior M&R: Tenant
Unit Janitorial: Tenant
Unit Utilities: Tenant
Basically, the Tenant is going to directly pay for expenses directly attributable to his unit. The Owner is going to pay for all common area and exterior expenses, together with management, and Real Estate Taxes, Insurance, etc.

Apr 10, 2010
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Brian D.
Broker/Agent
Beverly, MA

Modified Gross leases that are commonly used with multi-tenant office buildings.
A modified gross lease is similar to a full service gross lease, except that some of the base services are not included by the landlord (taxes, maintenance, insurance and utilities). The most common types of modified gross leases excludes maintenance, janitorial and electrical. This type of lease is commonly utilized in medical office buildings or multi-tenant single floor office buildings, where different tenants have varying needs for electrical or janitorial services. In general, this type of lease requires separately metering individual office suites to determine electrical usage. Generally in a modified gross lease the Landlord has the right to expense pass-throughs utilizing a “base year.”
Brian Dapice
Keller Williams Commercial

Apr 10, 2010
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Brian D.
Broker/Agent
Beverly, MA

Forgot to attach a link that details most types of leases

Apr 11, 2010
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Walter H.
Boca Raton, FL

That is a great question. Because the simple answer is that a modified gross lease means that you are going to need to ask the landlord what modified gross means.
If it is a modified gross, it means the lease is not a net lease, but it is not a gross lease. It is a hybrid and the tenant is going to have to cover some portion of the operating expenses. The possibilities are just about endless - kind of like Baskin Robbins - at least 31 different flavors.
In our case, some of our properties include janitorial service and some do not. Some modified gross leases include electric, some do not. In some cases we cover operating for the initial calendar year of the lease (Base Year) and the tenant pays the increases going forward. In some cases, operating expenses are paid by the landlord but the tenant is responsible for increases in taxes and insurance.
So to summarize, the only way yo find out what modified gross means, is to ask each individual landlord what modified gross means to him or her.

Apr 13, 2010
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Brian D.
Broker/Agent
Beverly, MA

I love that Baskin Robbins reference Ken. Good stuff!
Brian Dapice
Keller Williams Commercial

Apr 17, 2010
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Toni L.
Tenant
Encino, CA

What is nnn

Apr 26, 2014
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