Whether you are a medical doctor, a dentist or a veterinarian (or are the owner or operator of any other type of business), properly negotiating your office or location lease is an absolute must. This includes both the business and the legal aspects: negotiating a lower monthly rent won’t help you much if there are built-in default mechanisms or you can’t assign the lease if business goes bad. For healthcare professionals, there are certain terms that require particular attention during the negotiation process (in addition to every other term in the lease).
We have listed a few important provisions below and there will be more to follow in Part 2 of this blog series:
- Permitted Use and Exclusive Use Provisions. Most prospective landlords will be more than glad to lease property to a urology practice, a cardiology practice, a gynecology practice, a veterinary practice, an oral surgery practice, a general dentistry practice, or … you get the point. The type of practice will be the permitted use of the premises. But, you will not want to compete with other similar practices in your office building, shopping center or other development. So, you may want to consider pushing for exclusivity on all but ancillary uses of your type of practice. Additionally, review the lease carefully to make sure your permitted use does not run afoul of the operating covenants: hours, noise, odors, hazardous materials, etc. Make sure you aren’t torn between complying with the lease and complying with your licensing board.
- Operating Expense Exclusions. Does the lease list everything under the sun as a recoverable operating expense? There are certain types of expenses that should not be passed on to the tenant. These will differ in any given lease, but may include costs of capital expenditures and renovations, marketing funds, other lease concessions, and costs resulting from the negligence or legal violations of other parties. These exclusions can be a hard sell to landlords, but can have a major impact on the bottom line.
- Landlord’s Right of Entry. Minimizing interference with your practice is an essential must in the lease. Firstly, properly wording the lease can help prevent harmful effects on the business side of the practice. But, it is also important to make sure that the landlord respects your HIPAA obligations and you don’t inadvertently violate the law through landlord entry.