When evaluating commercial lease agreements, it’s essential to understand the structure behind the rent. Two common lease types—Gross Leases and Modified Gross Leases—can significantly impact your monthly costs, responsibilities, and long-term business planning.
Whether you're a tenant seeking a predictable budget or an investor looking to understand cash flow and risk, this breakdown will help you make informed decisions.
What Is a Gross Lease?
A Gross Lease (also known as a Full-Service Lease) is a rental agreement in which the landlord covers most or all of the operating expenses related to the property. That includes:
The tenant pays a single flat monthly rent, and the landlord handles the rest.
Best for Tenants Who:
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Want consistent, predictable costs
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Prefer not to manage fluctuating utility bills or property taxes
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Lease smaller office suites or coworking spaces
Landlord Considerations:
What Is a Modified Gross Lease?
A Modified Gross Lease strikes a balance between Gross and Triple Net (NNN) structures. In this model:
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The tenant pays base rent, plus a portion of the operating expenses.
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The division of responsibilities is negotiable. For example, the landlord may pay property taxes and insurance, while the tenant handles janitorial services and utilities.
Common Expense Splits Include:
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Utilities (electricity, water, gas)
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Interior maintenance (HVAC, cleaning)
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CAM charges
Best for Tenants Who:
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Want more control over their own utility usage or services
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Are leasing larger spaces or entire floors
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Need flexibility but still want some predictability
Landlord Considerations:
Key Differences at a Glance
| Feature |
Gross Lease |
Modified Gross Lease |
| Operating Expenses |
Paid by landlord |
Split between landlord/tenant |
| Monthly Rent |
One flat amount |
Base rent + tenant expenses |
| Budget Predictability |
High for tenant |
Moderate |
| Flexibility |
Low |
Medium–High |
| Common Use |
Office buildings, coworking |
Multi-tenant offices, retail |
Which Lease Type Is Right for You?
For Tenants:
If you want simplicity and fixed costs, a gross lease may be your best option. If you’re a growing business wanting more control over how you use utilities or services, a modified gross lease gives you room to adjust.
For Investors & Landlords:
Gross leases may attract tenants looking for convenience but come with higher financial risk. Modified gross leases allow for more flexibility and shared responsibility, especially in multi-tenant buildings.
Final Thoughts
Lease structure isn’t one-size-fits-all. It should align with the property type, tenant profile, investment strategy, and end goals.
The team at NAI Harmon Group, can assist you, whether you are a landlord or a tenant, in understanding which lease structure fits your situation and supports your long-term goals. Whether you’re managing office space in Toledo, evaluating leases in Defiance, or looking for investment opportunities across the United States, our team, along with our affiliation to NAI Global brings deep market knowledge and personalized guidance to every transaction.
Ready to Find the Right Lease Structure?
Contact the team at NAI Harmon Group today to explore commercial lease options that fit your business needs and investment goals.
Phone: (419) 960-4410
Website: www.naiharmon.com