Reviewed by Casa Academy and updated July 29, 2026 using the current DBPR checklist and Pearson VUE scheduling guidance.
Modified Gross Lease
A modified gross lease is a commercial lease where the landlord and tenant split operating expenses such as utilities, taxes, insurance, or common area maintenance according to negotiated terms, falling between a full-service gross lease and a triple-net lease in expense allocation.
Exam context
Modified gross splits expenses between landlord and tenant. Gross lease landlord pays most operating costs. Net lease tenant pays property costs; triple net adds taxes, insurance, and maintenance.
Expense sharing patterns
Landlords may pay property taxes and insurance while tenants pay utilities and janitorial inside the suite. Some modified gross leases set a base-year expense stop: the landlord covers increases only above the first-year level. Office buildings often use modified gross with tenants reimbursing pro-rata share of CAM above a stated base.
Negotiation points
Tenants compare effective rent by modeling expense pass-throughs, not just base rent per square foot. Caps on controllable operating expenses protect tenants from management cost spikes. Agents representing commercial tenants clarify which CAM categories are included and how reconciliation occurs annually.
Examples
Base-year stop
A tenant pays $28 per square foot base rent. The landlord pays operating expenses in year one; in later years the tenant reimburses increases above the year-one expense level.
Utility split
A retail modified gross lease requires the tenant to pay metered utilities and trash while the landlord maintains roof, structure, and property taxes.
Keep studying
Related terms
- Lessor vs lesseeLandlord and tenant roles in expense-sharing leases.
- Leasehold estateTenant possessory interest under a commercial lease.
Related resources
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- Florida exam topic hub
Florida-specific explainers and question sets for this topic area.
Sources
- BOMA: lease measurement standards(Building Owners and Managers Association)