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 Delaware, 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 from lease to lease 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 based on the square footage they occupy relative to the total available space. Delaware state statutes and federal law do not prescribe a specific format for modified gross leases, which means the terms are largely dictated by the lease agreement itself. It is important for both landlords and tenants to clearly understand and negotiate the terms of a modified gross lease, including which expenses are included, how they are calculated, and any caps or limits on expense reimbursement. Tenants may wish to consult with an attorney to ensure that the lease terms are fair and to understand their financial obligations under the lease.