A hybrid lease structure where the landlord covers some operating expenses and the tenant pays others directly, splitting expense responsibilities between a pure gross lease and a triple net lease.
Modified gross leases are highly customizable and require careful review because the specific expense allocation varies by deal. Common structures include the landlord paying property taxes and insurance while the tenant pays utilities and janitorial; or the tenant paying increases in taxes and insurance above a base year while the landlord covers routine maintenance. The key distinction from a NNN lease is that the landlord retains responsibility for at least some operating costs. Lease abstracts must enumerate exactly which expenses are landlord-borne and which are tenant-borne to avoid disputes and model cash flows accurately.
NNN and gross leases shift expense risk differently. Learn how each structure affects your total occupancy cost and what to watch for in the abstract.
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