Leasing medical office space has a number of slight differences to leasing other commercial properties. And while these differences may be slight, knowing about them–and how to handle them when negotiating the lease–are going to be crucial to your success.
What are the benefits of leasing medical office space?
Leasing medical office space has a number of benefits as opposed to purchasing your own building or suite. These are some of the main benefits to leasing medical office space:
- Less upfront investment. Obviously it’s going to cost you less upfront to sign a lease than the potential down payment on a building. Additionally, if you are leasing a space that is already set up for what you need, you won’t be spending much on renovations.
- Location. Often medical buildings are grouped with other medical specialists, which makes it very convenient for patients. If you were to buy a building and renovate it yourself, you may not be located in such a complex.
- Patient familiarity. If you are leasing a space that was previously operating as a medical office, then patients will already be familiar with the location. This would not be the case if you bought a building and renovated it as a medical office.
- Flexibility. If you sign a lease, you always have the option to break your lease and move to a different location. While this would incur some costs, it would be much easier than the potential problem of having to sell the building.
So if leasing is what you want to do, what do you need to know about medical office leases specifically? Here are fifteen things you should be aware of:
1. American Disabilities Act (ADA) Compliance
Any medical office will need to comply with the ADA and medical buildings tend to be even more under the scrutiny of the ADA than other commercial buildings. There is a long list of extremely specific regulations that building owners must comply with to accommodate the disabled.
Things like having at least five square feet in the exam room for a patient in a wheelchair to turn around for example, need to be considered. You should know exactly what these are and what changes might need to be made to the building before signing the lease.
2. The Parking Situation
Parking also comes into play to get ADA compliance, since there will need to be ramps for wheelchair access, and there will need to be curb cuts in the sidewalk. In a more general sense, you need to be certain that there will be adequate and convenient parking for your patients. Not all the parking spaces you see outside a building are designated for your use in the lease, so be sure to ask about this.
3. Proximity To Other Specialists
One feature to look for when leasing medical office space is how close the building is to other medical specialists. Some buildings house a number of specialists which makes it very easy on patients when being referred to a different doctor. While this is not a necessity, it can definitely be an added benefit.
4. Space Buildout Costs and Considerations
The ideal situation when leasing medical office space is to find a location that is already set up for medical to some degree. Medical buildings have a lot of extra design features that a regular building does not. For example, if you were going to have an X-Ray machine, the building (or the room) would have to be properly built to contain the radiation.
Exactly what you need to change to set up for your specific practice is something that will be different from location to location. This one aspect will affect your initial investment to a great degree, so be sure to communicate to the landlord what you want to do, and get accurate estimates on what it will cost. Additionally, you can often negotiate a tenant improvement allotment in your lease which would get the landlord to cover some of your buildout costs.
5. Hazardous Materials
When negotiating a lease for a medical office space be sure that your lease allows you to handle certain types of biomedical waste. There may be certain protocols you need to follow for disposing of this waste, so be sure this is mentioned in your lease. You wouldn’t want to find out after moving in that some certain waste your office produces is prohibited by your lease!
6. After Hours Access
If you know that you will need to be open late to accommodate patients, be sure that you will have access to the building at the hours you plan to be open. Some buildings close at certain hours, while others have 24 hour access.
You should also consider that heating and air conditioning for most buildings is turned off after 6pm on weekdays, 1pm on Saturdays and all day sunday. If you plan to operate outside these hours and your building has these stipulations, you can negotiate to have them on for your unit at specified hours.
7. Patient Privacy
Patient privacy is very serious, and this factor must be considered in the lease. For example if the landlord were to walk through the office for an after hours inspection, there is a chance that confidential patient files could be exposed. So the lease must state that such inspections would need to be announced, and that all patient files would need to be properly secured if an after office hours inspection were necessary.
8. Death And Disability Clause
If you are the only doctor in your practice you will certainly want to include this clause in your lease. Typically this would state that in the event that the primary doctor were to die or become disabled, or if he or she could not practice, then the tenant would be excused from the lease. This makes sense especially when some medical leases are five to ten years in length, and circumstances could reasonably change within that time frame.
9. Length Of Lease
Medical leases tend to be for five to ten years. This is because a medical office has very specific design features, so finding another tenant who has the exact same needs can be difficult. Make sure to find out how long your lease will be for and if it fits your needs.
10. Approved Contractors
When leasing medical office space, it’s typical that you would need to make some design changes to properly set up your practice. Some landlords can be picky about which contractors they will allow to work on their building, so establishing this before signing the lease is a good idea. If you have contractors who you trust, then it would be prudent to check with your landlord to make sure using them will be alright. Some contractors specialize in medical builds, especially for dental and radiology practices.
11. End Of Lease Obligations
Some leases mandate that upon termination of the lease, that the tenant must restore the building to its original state. This could be extremely expensive in some circumstances, so knowing what you are obligated to do will prevent this from happening.
12. Maintenance Responsibilities
One benefit to leasing medical office space is that most medical office leases put the responsibility of maintenance on the landlord. That means that if you have a good landlord, you won’t have to worry about staying in line with any specific medical regulations you need to follow in terms of the building. But making sure these responsibilities are placed on the landlord is a good idea, otherwise you may be facing heavy costs in order to stay in compliance with health codes.
13. Exclusive Use Clause
You may want to negotiate your lease to include an exclusive use clause which would prevent another practice of the exact same type as yours from leasing space in the same building. This is a fairly common clause that gives you the benefit of limiting competition in the area.
14. Relocation Provisions
Because of the extensive building specifications for medical offices, moving can be very expensive. This is why it’s a good idea to have provisions in your lease which protect you from being relocated by the landlord. For example, the landlord may decide you have to move to another suite in the building. If this is the case, the lease should state that in this event, any expenses incurred because of the move would be covered by the landlord.
15. Subleasing
It’s a good idea to negotiate the option to sublease your unit into your lease. This gives your practice flexibility in the event you want to expand to a bigger office or retire your practice.
16. Lien Rights For Financing
Some lenders will want lien rights to any medical equipment or improvements made on the property. For example, this would give the lender the rights to your medical equipment in the event you didn’t pay your loan. Having this in your lease can grant you access to more financing, but needs to be signed off on by the landlord since otherwise the landlord would hold the rights.
The Right Lease Makes All The difference
Because leasing medical office space has so many nuances, it’s important to have a tenant representative who has experience with medical leasing. This way you can be sure that when you do find the perfect location, your lease will be written in such a way that you are protected. By knowing these fourteen points about leasing medical offices, you can ensure that you will engage in a successful contract with the landlord.
