Understanding NNN, Gross, and Modified Gross Leases: A Beginner’s Guide
- marketing08413
- Sep 10
- 2 min read
When it comes to commercial real estate, one of the most important (and sometimes confusing) parts of a lease is how expenses are handled. Beyond just paying rent, tenants and landlords need to agree on who covers property taxes, insurance, maintenance, and utilities.
Three of the most common lease structures you’ll encounter are NNN (Triple Net), Gross, and Modified Gross. Each comes with different responsibilities for the tenant and landlord. Let’s break them down.
NNN Lease (Triple Net Lease)
How it works: In an NNN lease, the tenant pays base rent plus the three “nets”:
Property taxes
Insurance
Maintenance
The landlord usually only handles structural repairs, such as the roof, foundation, or exterior walls.
Where you’ll see it: NNN leases are common in retail centers, industrial properties, and single-tenant buildings.
Key takeaway: Tenants carry most of the operating costs. This often means lower base rent but higher overall responsibility.
Gross Lease
How it works: In a gross lease, the tenant pays one flat rental amount. The landlord covers most, if not all, operating expenses, such as:
Property taxes
Insurance
Utilities
Maintenance
Where you’ll see it: Gross leases are frequently used in office buildings, where predictable rent payments make budgeting easier for tenants.
Key takeaway: Simple and straightforward—tenants know exactly what they’ll pay each month.
Modified Gross Lease
How it works: Modified gross leases fall in between the other two structures. Tenants pay base rent plus a negotiated portion of operating expenses. For example, a tenant might cover utilities and janitorial services while the landlord pays property taxes and insurance.
Where you’ll see it: Modified gross leases are common in multi-tenant office and industrial buildings.
Key takeaway: Flexible and negotiable—expense sharing can be customized to fit both landlord and tenant needs.
Quick Recap
NNN Lease = Tenant pays almost everything.
Gross Lease = Landlord pays almost everything.
Modified Gross Lease = They split the costs.
Understanding lease types is crucial when evaluating a commercial property. Whether you’re a tenant planning your budget or a landlord structuring a deal, knowing the difference between NNN, Gross, and Modified Gross leases ensures you walk into negotiations with confidence.
Written by LevRose CRE with assistance from: LevRoseCRE.(2024)
ChatGPT [Open AI]. https://chat.openai.com/