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 Virginia, 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's important for both landlords and tenants to clearly outline and agree upon which expenses are included and the method of calculation in the lease agreement to avoid future disputes. Virginia state statutes and federal law do not prescribe a specific format for modified gross leases, so the terms are largely dictated by the lease negotiations between the landlord and tenant. As with any contract, it is advisable for both parties to consult with an attorney to ensure that their rights and obligations are adequately protected and that the lease complies with all applicable laws.