Gross vs. modified gross vs. NNN: which lease are you looking at?

Updated October 27, 2026 · General information, not legal advice.

Two spaces can be quoted at very different rents and still cost about the same, or the reverse. The difference is usually the lease structure: who pays the building's operating costs. This guide compares the three structures small tenants see most often and shows how to compare quotes on equal footing.

How to use this guide: read it with your own lease or proposal open beside you. Lease labels and "standard" terms vary from property to property and from landlord to landlord, so treat everything here as a list of things to look for and questions to ask, not as a description of what your document says. When a section of your lease is unclear, ask the landlord or its representative to explain it in writing, and keep notes of what was agreed.

The short version

Gross (full service). You pay one rent, and the landlord pays most building operating costs out of it.
Modified gross. A middle ground. You pay rent plus some specific costs, or you pay increases in costs above a base amount.
Triple net (NNN). You pay base rent plus your share of property taxes, insurance, and common area maintenance.

These labels are not standardized. Two leases with the same label can split costs differently, so the lease language always controls.

Gross leases

In a gross lease, the rent is meant to cover the building's operating expenses. Gross and full-service leases are more common in multi-tenant office buildings. Utilities and janitorial may be included, especially in full-service office leases.

Many "gross" leases still pass through increases. A common method is a base year: the landlord pays operating costs up to the level of a set year, often the first year of your lease, and you pay your share of increases above that. Another method is an expense stop: the landlord pays up to a fixed dollar amount per square foot, and you pay above it.

Why it matters: with a base year, your first year may have no pass-through, but later years can. Ask how the base year is set and whether it is "grossed up" for occupancy, which can affect the comparison.

Modified gross leases

Modified gross leases split costs in a negotiated way. Common versions:

Tenant pays rent plus its own utilities and janitorial; landlord covers taxes, insurance, and common area costs.
Tenant pays rent plus increases over a base year in taxes, insurance, and maintenance.
Tenant pays some specific items, such as its own HVAC maintenance.

Because "modified gross" covers so many arrangements, list every cost category and write down who pays it.

Triple net leases

NNN leases are very common in retail and industrial property. You pay base rent plus your pro rata share of taxes, insurance, and CAM, usually as a monthly estimate with a year-end reconciliation. Our NNN guide and CAM guide cover the details.

How to compare quotes fairly

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Make a simple table for each space with these rows:

Base rent per month
Estimated operating expenses or NNN per month (ask for history, not just this year's estimate)
Utilities you pay directly
Janitorial, trash, and other services you pay directly
Repairs you are responsible for, especially HVAC
Annual increase in base rent
Any base year or expense stop, and the likely pass-through in later years

Add them up for year one and for later years. A low NNN base rent and a higher gross rent can end up close once everything is included. The free move-in cost calculator helps with upfront costs.

Risk: who absorbs surprises?

The deeper difference between structures is who bears the risk of rising costs. In a true gross lease, the landlord absorbs most of the cost surprises during the term. In a NNN lease, tenants absorb them. Modified gross sits in between. If your budget is tight and predictability matters most, that risk is worth weighing alongside the monthly number.

Questions to ask about any structure

Exactly which costs are included in my rent, and which do I pay separately?
Is there a base year or expense stop? How is it set?
What did pass-through costs look like over the last few years?
Who repairs and replaces HVAC?
Are utilities separately metered?
Is there a cap on increases in controllable costs?

Ask these early, ideally before the letter of intent.

Frequently asked questions

Is a gross lease always cheaper?

No. Gross rent usually builds in operating costs, so the rent is higher. Compare total cost, not base rent.

What is a base year?

A reference year for operating costs. You typically pay your share of increases above that year's costs.

Which structure is best for a small tenant?

It depends on your budget, the property type, and your tolerance for cost changes. Understanding the split matters more than the label.