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 California, a modified gross lease is a type of commercial lease agreement where the tenant pays a fixed base rent plus a share of certain operating expenses for the property. The specific expenses covered by the tenant can vary from lease to lease, but commonly include property taxes, insurance, utilities, maintenance and repairs, and common area maintenance (CAM) costs. The tenant's proportionate share of these expenses is typically determined based on the square footage they occupy relative to the total leasable space. It's important for both landlords and tenants to clearly define and agree upon which expenses are included in the lease and the method of calculation for the tenant's share. The terms of a modified gross lease can be complex and may require negotiation to ensure that both parties' interests are protected. Tenants may seek the assistance of an attorney to review and negotiate the terms of a modified gross lease to ensure clarity and fairness in the allocation of expenses.