Difference Between Modified Gross and Gross Lease
When it comes to commercial leases, there are two types: gross leases and modified gross leases. These leases differ in terms of cost division between the landlord and tenant.
A gross lease means that the landlord is responsible for all operating expenses, including property taxes, insurance, maintenance, and utilities. This type of lease is commonly used for residential properties or situations where it’s hard to predict exact costs.
On the other hand, a modified gross lease is where the landlord and tenant agree to split the costs of operating the property. The tenant pays a base rent amount that covers some operating expenses, like property taxes, insurance, and maintenance. The landlord pays for other expenses, like utilities. However, the lease agreement may allow for some flexibility, where the tenant may be responsible for certain expenses based on usage.
In short, the main difference between a gross lease and a modified gross lease is the division of costs between the landlord and tenant. In a gross lease, the landlord covers all costs, while in a modified gross lease, both parties split the expenses. Understanding these lease types can help tenants and landlords negotiate leases that work best for their needs.
