PSI Virginia Real Estate Practice Exam

A modified gross lease is characterized by:

1. The tenant paying all costs

2. Shared expenses between tenant and landlord

3. The landlord handling all maintenance

4. No expenses being incurred

The correct answer is: Shared expenses between tenant and landlord

A modified gross lease is an arrangement where the expenses related to the property are shared between the landlord and the tenant. In this type of lease, the tenant typically pays a base rent, and certain operating expenses, such as property taxes, insurance, and maintenance costs, are divided or specifically allocated. This structure allows tenants to have predictable costs while still sharing some of the responsibilities associated with property upkeep and expenses. This leasing arrangement contrasts with a standard gross lease, where the landlord would cover all operating expenses, and a net lease, where the tenant bears most of the costs. The modified gross lease strikes a balance, making it appealing to both landlords and tenants. It ensures that tenants are contributing to property maintenance while allowing landlords to mitigate some of the financial burdens associated with property ownership.