NNN vs gross vs modified gross.

By Chase Farache, Broker Associate, Silver Lining Realty Group. Updated October 2026.

Three structures, one question: who pays the operating costs

Every commercial building has the same core operating costs: real estate taxes, property insurance, and common area maintenance (landscaping, parking lot, lighting, management, repairs to shared systems). Lease structures differ only in how those costs are split between landlord and tenant.

• Gross (full service) lease. The tenant pays one rent figure, and the landlord pays the operating costs out of it. Usually there is a base year: the tenant pays its share of any increase above the costs in the first year of the lease.
• Triple net (NNN) lease. The tenant pays base rent plus its share of taxes, insurance and CAM, usually as monthly estimates reconciled once a year. Some NNN leases also push roof, structure or parking lot replacement to the tenant; others leave those with the landlord. Read the repair clause, not the label.
• Modified gross lease. Anything in between. A common version has the tenant paying base rent plus its own electricity and janitorial, while the landlord covers taxes, insurance and CAM up to a base year.

None of these labels has a statutory definition in Florida. Chapter 83, Part I of the Florida Statutes, which governs nonresidential tenancies, deals with things like notice, default and removal of tenants, not with how expenses are shared. The lease text controls.

Where each structure shows up in South Florida

Patterns vary by building and owner, so treat these as starting points rather than rules:

• Multi-tenant office and medical office buildings are often quoted gross or full service with a base year, or as NNN with a separate operating expense figure. See office space and medical office space.
• Flex, warehouse and industrial space is frequently quoted NNN, with the tenant paying its own utilities inside the unit. See flex space and warehouse space.
• Single-tenant buildings are often leased on terms where the tenant takes on most operating costs, sometimes including the roof and structure.

When two listings use different structures, convert both to a total annual cost before deciding which is cheaper.

A worked comparison (hypothetical numbers)

The figures below are invented to show the math. They are not market rents or market expenses.

A hypothetical tenant needs 2,000 rentable square feet and has two offers:

• Space A, NNN: base rent of $20.00 per square foot plus estimated operating expenses of $10.00 per square foot. Year-one cost: 2,000 x $30.00 = $60,000.
• Space B, gross with a base year: rent of $29.00 per square foot, including operating expenses. Year-one cost: 2,000 x $29.00 = $58,000.

Space B looks cheaper in year one. Now suppose operating expenses rise 8% in year two. In Space A, the tenant's expense line rises from $10.00 to $10.80, adding $1,600. In Space B, the tenant pays its share of the increase over the base year, which is the same $1,600 if the base year expenses were $10.00. The two converge once you add escalations, so the deciding points become the base-year definition, caps on controllable expenses, and what is excluded from pass-throughs.

The other variable is size. If Space A is measured to the BOMA office standard and Space B uses a different load factor, the same usable footprint can carry different rentable square footage. BOMA's current office standard is ANSI/BOMA Z65.1-2024, and its stated purpose is calculating rentable area. Ask each landlord which standard and edition were used.

Florida property taxes and your reconciliation

Taxes are usually the largest single pass-through, and Florida's calendar explains why NNN reconciliations arrive when they do:

• Real property is assessed as of January 1 each year (s. 192.042, F.S.).
• Taxes are due November 1 and become delinquent on April 1 of the following year (s. 197.333, F.S.).
• Paying early earns a discount of 4% in November, 3% in December, 2% in January and 1% in February (s. 197.162, F.S.).

That gives you two questions for the landlord. First: does the pass-through reflect the discounted amount actually paid, or the gross bill? Second: what happens after a sale? Under s. 193.1555, F.S., certain nonresidential property has a 10% annual cap on assessment increases, but the property goes back to full just value after a change of ownership or control. A building that sells mid-lease can see a jump in assessed value the next January, and on a NNN lease that increase flows to tenants unless the lease limits it.

Questions to ask before you sign

1. Which costs are passed through, and which are excluded (capital replacements, landlord's financing, leasing commissions, costs covered by insurance)?
2. Is there a cap on increases in controllable expenses, and does it compound?
3. For a gross lease, what is the base year, and will it be grossed up for occupancy?
4. Who pays for roof, structure, parking lot and HVAC replacement, as opposed to repair?
5. When is the annual reconciliation delivered, and do you have audit rights?
6. Are utilities separately metered, and who pays after-hours HVAC?
7. Does the lease still require you to pay sales tax on rent? For periods after September 2025 that tax no longer exists for commercial rent; see Florida sales tax on commercial rent.

For a deeper look at the expense side, read CAM charges explained.

How I help tenants compare offers

On a tenant search I put every option on the same basis: rentable and usable area, base rent, the current operating expense budget, escalations and caps, and the allowance for improvements, then the total cost over the full term. If you are weighing a lease against an ownership option, the buy vs lease guide walks through that decision. To start, call or text (561) 715-7222 or use the contact page.

Not legal or tax advice. Laws, codes and local rules change; confirm current requirements with your attorney, CPA, architect or the permitting office before you act.