Modified gross refers to a specific type of lease agreement. For this reason, it is most commonly known as a modified gross lease. In a modified gross lease, the owner or landlord is usually responsible for the major expense items, including structural maintenance and repair, exterior maintenance and repair and common area maintenance. This leaves the costs of interior maintenance and repair, janitorial and utilities up to the tenant to pay. Some landlords or owners will pay property taxes and insurance for the first year, establishing the typical costs for a base year. After the base year costs are determined, any subsequent rate increases in property taxes or insurance will become the responsibility of the tenant. Since these are by definition “modified leases,” there can be many variances of this type of lease.
