Modified gross leases are often used for properties that host a variety of tenants, such as offices, malls, or retail outlets. The costs the tenant pays is often in proportion to the square footage of the commercial real estate they’re leasing.

A common arrangement with this lease involves the tenant paying for their portion of utilities and other variable costs, with the landlord handling repairs, taxes, and insurance.

Benefits

• Highly customizable – Unlike gross and triple net, the modified gross lease can include any of the “nets,” allowing it to be used for a wide range of situations.
• Promotes negotiation – The parties can decide which costs they wish to pay. For example, the tenant can ask to pay for a utility that they don’t expect to use much, and the landlord can use such requests to negotiate a longer term or higher rent.