What would "modified gross" include?

In Leasing Property - Asked by Judi S. - Sep 30, 2010
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Answer(s)

Richard P.
Broker/Agent
Honolulu, HI

A modified gross lease typically covers all operating expenses for the first year or "base year" of a lease and then passes through any increases in operating costs to the tenant by way of a pass through provision.

Sep 30, 2010
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Kenny A.
Broker/Agent
Tampa, FL

A modified gross lease may exclude utilities such as electric

Oct 1, 2010
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Evan L.
Broker/Agent
Millersville, MD

The bottom line is that you need to read the lease language. A triple net lease means that the tenants are reimbursing taxes, insurance, and CAM (and possibly any structural repairs in a true NNN lease). A full service gross lease is when your base rent IS your rent, and the expenses are paid by the landlord. A modified gross lease is where the tenant is reimbursing a portion of the expenses. I've done deals in over twenty states, and the tenant reimbursements vary by the area and the property type, as well as other factors. I've been a commercial real estate attorney and broker for 25 years. The only sure way to know what the expense reimbursement scenario is is to read the lease document. Terms like modified gross are thrown around the brokerage community very carelessly. I'm not a big fan of unwelcomed surprises. Read the lease document and get the historical expenses from the landlord.

Oct 7, 2010
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Frank N.
Broker/Agent
Phoenix, AZ

Judi:
The term "Modified Gross" itself will only tell you that it is not an "Absolute Triple Net" nor is it a "Full Service" lease. It can mean anything in between.
While many markets may have a general understanding between brokers what is meant by "Modified Gross", which may be demonstrated by the different responses you get from different regions of the country to your question, there is no pat answer.
Modified Gross is a term tossed around by us brokers to label something that can't really be correctly labeled. What it should mean to you and your client is READ AND UNDERSTAND THE TERMS, PROVISIONS AND CONDITIONS OF THE LEASE!

Oct 7, 2010
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Marty H.
Broker/Agent
Lenexa, KS

There can be many, many variations in what is included. The only limitation is the imagination of the parties crafting the language. In other words, make sure you read and understand the terms of the lease.

Oct 7, 2010
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Paul R.
Broker/Agent
Denver, CO

As suggested already, it does vary. In Colorada, it generally means the lease includes real estate taxes and property insurance. It usually means the tenant pays their own utilities. Property maintenance is a grey area that veries from landlord to landlord.

Oct 7, 2010
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