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 Hawaii, a modified gross lease is a type of commercial lease agreement where the tenant pays a fixed base rent plus a share of the property's operating expenses. These expenses can include property taxes, insurance, utilities, maintenance and repairs of structures and systems, and common area maintenance (CAM) costs. The specific terms of a modified gross lease can vary widely, with tenants sometimes responsible for different combinations of these expenses and the method of calculating their share differing from lease to lease. The exact obligations of the tenant will be detailed in the lease agreement, and it is important for both landlords and tenants to clearly understand and negotiate these terms. Tenants should consider seeking advice from an attorney with experience in commercial real estate to ensure that the lease terms are fair and clearly understood. State statutes and federal law do not typically dictate the specific terms of modified gross leases, as these are contractual matters agreed upon by the parties involved. However, all lease agreements must comply with general contract law principles and any relevant state-specific commercial leasing regulations.