What is a modified gross lease?

In Leasing Property - Asked by Meir B. - Jun 23, 2014
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Answer(s)

Brian S.
Las Vegas, NV

SIOR provides one of the better definitions.
Modified Gross Lease: A lease in which a tenant pays a fixed sum for rent from which
landlord pays all operating expenses for the first or lease year (or dollar stop), and
thereafter tenant pays all increases in operating expenses or the increases beyond the
fixed ceiling, called a dollar stop.

Jun 23, 2014
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Joseph B.
Broker/Agent
Green Brook, NJ

Adding some clarification to Brian's answer. The lease is gross to start, but allows the Landlord to "pass-through" increases in operating expenses. So, for instance, in the second year of the term the lease the taxes go up, the tenant's proportionate share of tax increase is passed on to the tenant. It is a common type of lease for office space.

Jun 25, 2014
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Allen M.
Broker/Agent
Woodbridge, VA

In our market, the "modified" qualifier often suggests that the lease rate is structured as a hybrid of a triple net and a gross lease, meaning that SOME of the operating expenses are included in the rental rate (and if they increase over the base, the tenant would be responsible for those increases), but not ALL expenses, as the carved-out expenses are paid directly by the tenant. Often times, a "modified" gross lease will be net of utilities, for example.

Jun 30, 2014
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