Updated October 02, 2023
A commercial modified-gross lease agreement is a rental contract that requires the tenant to pay a base rent amount plus a portion of the property expenses. The property expenses commonly include real estate taxes, insurance, and common area maintenance (CAMs).
Gross Lease vs. Modified-Gross Lease
In a gross lease, the tenant pays ONLY the base rent. In a modified gross lease, the tenant pays the base rent plus a portion of property expenses (real estate taxes, insurance, and operating expenses).
Common Practices
It is common in modified-gross agreements that the tenant pays for the common area maintenance (CAM’s) while the landlord pays for the insurance and taxes on the property. Although, the parties can choose to apportion the property expenses as desired.