Leases for medical offices
By Matt Dickstein
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Medical offices need special lease provisions. All leases need negotiation and revision, but leases for physicians need a little more. In this article, I discuss some advanced lease provisions that medical practices frequently need. For a basic explanation of commercial leases, refer to my article Understanding Commercial Leases.
Without further ado, physicians should consider these additional lease provisions:
Negotiate a construction plan with the landlord before you sign the lease. Also be clear what the lease requires at the end of the term regarding your removal of the tenant improvements and restoration of the premises to their original condition. At the end of a lease, a landlord is more likely to demolish the specialized tenant improvements of a medical office than the more classic office or retail tenant finish. You might want to negotiate the cost of restoration in the lease.
Hours of Operation
In many leases, the landlord does not provide basic services on the weekend, holidays or after hours. If you service patients on the weekend, after-hours or on holidays, or at other unusual hours, be sure that the lease reflects this and that the landlord provides basic services during off-hours. Heating and air-conditioning are the most obvious needs – when these services are not provided, office space (especially space with big windows) can be freezing in the winter and roasting in the summer. Also, note that some leases require specific hours for which you must be open for business, so be sure that you will be open at these times (or change the lease to reflect your business hours).
You’ll pay the costs of ADA compliance for your office; usually you do this when building out the space and constructing tenant improvements. With ADA compliance, the real issue is who pays for compliance to the building (as opposed to your premises). Understand that as a practical matter, your medical office may trigger the need for ADA compliance for the whole building. You don’t want to bear the entire cost of this work, however; you’d much rather make the landlord pay for it or at worst, share the cost with the other tenants in the building. Therefore be on the lookout for leases that obligate the tenant to pay the costs of ADA compliance for the building (not just your premises).
Forced Move to Substitute Premises
Many leases have provisions requiring the tenant to consent to a substitute premises if the landlord wants to move the tenant. Delete these provisions from the lease if your tenant improvements are significant, or if your patients can only access your original office.
Use of Premises
You may want to take on other health care practitioners to increase the scope of services you offer your patients. In this respect, be careful that your use clause isn’t too narrow.
Assignment / Sublet
You may want to sublet single offices in your premises to related health care providers. Make sure your assignment / sublet provision permits this. Also, it helps to have a provision that permits you to assign the lease to a buyer of your practice who meets certain financial standards — this helps with your exit from your practice.
To get patients or other business, your medical practice might depend on another practice or business that is located next door or in the same building or complex. If this is the case, consider negotiating for the right to terminate your lease if this other practice or business were to leave.
Death / Disability Termination
For solo practitioners, consider negotiating for an automatic termination of the lease if you were to die or become disabled. This gives peace of mind to you and your family, because they won’t be stuck with your lease liability after you lose the ability to practice. And lastly,
Privacy and Landlord Access
Physicians need to limit the landlord’s access to examining rooms and other areas during certain hours of the day. Generally, medical tenants want to restrict the landlord’s reentry rights to public areas of the office.
If you’re still awake at this point, congratulations. Don’t forget to read Understanding Commercial Leases for a more basic explanation of commercial leases. Then try this article — Common Area Maintenance (CAM) in a Commercial Lease.
I hope this article is useful to you. As always, I only glossed over the outlines of the subject. A lease is a major financial commitment so please talk with a lawyer before signing one. Good luck.