A modified gross lease is a commercial lease in which the tenant pays a fixed base rent on a monthly or annual basis, but also agrees to pay a proportional amount of the operating expenses for the property, such as:

• taxes

• property insurance

• utilities

• maintenance and repairs (including structures such as the roof), systems (heating, ventilation, and air conditioning and electrical)

• common area maintenance (CAM) such as maintenance of the parking lot, landscaping, maintenance staff, security staff, and maintenance of elevators and escalators.

There are many variations of modified gross leases, with different expenses reimbursed by the tenant to the landlord, and different methods of calculating the tenant’s proportionate share of the expenses.

In Arkansas, a modified gross lease is a type of commercial lease agreement where the tenant pays a set base rent plus a share of certain operating expenses for the property. The specific expenses covered by the tenant can vary based on the lease agreement but typically include property taxes, insurance, utilities, maintenance and repairs, and common area maintenance (CAM) costs. The tenant's proportionate share of these expenses is usually determined by the percentage of the total leasable space that the tenant occupies. It is important for tenants to carefully review and negotiate the terms of a modified gross lease to understand their financial obligations. Both parties should agree on how operating expenses are calculated, which expenses are included, and any caps or limits on the amount the tenant is responsible for paying. As with any contract, it is advisable for both landlords and tenants to consult with an attorney to ensure that the lease terms are clear, fair, and compliant with Arkansas state statutes and federal law.