Difference between modified net and modified gross

In Leasing Property - Asked by Michael C. - Mar 7, 2011
Report Abuse
Answer this Question


Ray M.
Leesville, LA

Net and Gross refer to whether the base rent includes operating costs. When a lease is Net, it means that the base rent being paid does not include building taxes, insurance, utilities or other operating expenses. These must be paid for separately by the tenant. On the other hand, when a lease is a Gross lease, the tenant pays a lump sum each month, and all of these additional costs are included in the rent.

Mar 7, 2011
Report Abuse
Rob B.
Chandler, AZ

Michael....Modified gross is an adjustment on a gross lease. The gross lease will provide all the costs of property operation in your one rental amount. The triple-net lease will charge the tenant for property taxes = N1; property insurance = N2; and property common area maintenance = N3, as well as the tenant taking care of all costs within the suite. These charges will be on top of your base rent. In a common approach to a modified gross lease the tenant will pay for all costs within the suite (utilities, janitorial and general maintenance such as changing lights, etc.), while the landlord will be responsible for all costs outside the suite (property taxes, building insurance and common area maintenance). There are other creative ways to modify a gross lease as well. The key is arriving at a point where both the landlord and the tenant are relatively satisfied. Good luck Michael.... Rob Baird, CA RE License #544165 (One of the oldest, active licenses in CA) 951 515-5855 Email: rob@capratecommercial.com

Mar 7, 2011
Report Abuse
Patrick S.
San Antonio, TX

The others alluded to it, but didn't say it flat out: there is not a universal definition for either of those.
And, much like the proverbial glass of water being both half-full and half-empty, the same lease (that has the Tenant paying for some expenses and the Landlord paying some expenses) could be referred to either as modified net OR modified gross.

Mar 16, 2011
Report Abuse
Chris R.
Denton, TX

There are net and gross leases and then there are modified net and modified gross leases and any of those can mean different things in different parts of the country. Answers already provided are good. Just have to see what is prevalent in your market place - what are other similar properties quoting so that you are competitive in your rate, terms, what expenses are included or not in base rent, what expenses are covered by landlord vs. those covered by tenant. You could have 2 properties nearby that both quote $12/SF/Yr. One might include some expenses and the other would not so you have to look beyond a price quote as to what all is included.

Apr 8, 2011
Report Abuse

Welcome to Answers

LoopNet Answers is where the commercial real estate community shares what they know to help each other out. And it's all for free.

Ask a question to get advice from brokers, investors, professionals and local experts.

Answer questions to raise your visibility as a trusted advisor and build new relationships.

Ask a Question

Post Question