Medical office lease is one of the most significant business agreements physicians need to negotiate during their professional career. Poorly negotiated leases can make it difficult for physicians to sell their practice. It costs them thousands of dollars if they decide to move, and also leaves them responsible for paying office rent after they retire. However, if you identify and avoid hidden risks, you can reduce and also eliminate all problems and pitfalls in your medical office lease while keeping your options open for the future. Professional business valuation services prove helpful in identifying hidden risks and negotiating on the lease.
Here are some hidden risks that you need to identify and avoid when signing a medical office lease.
Avoid believing in standard lease
A landlord may try to fool you into believing the need to sign a ‘standard’ lease. In fact, you may find many leases with the words ‘STANDARD LEASE’ at the top of the first page to make you believe that some higher authority has already reviewed and approved the lease as a ‘standard’ lease. Never believe in it. There is nothing called ‘standard’ when it comes to lease documents. In fact, tenants occupying the same floor of a particular building are likely committed to prepare and sign different lease documents.
Risk of rent payment after retirement
Another important issue that you need to consider when signing a medical office lease is that when you are selling your practice in the future you should be liable for the payment of rent by the new owner. As the original tenant remains on the hook by law, the landlord will look only at you and your personal assets in the event of a non-payment of rent by the new owner. As a matter of fact, this is a sizable burden. It includes monthly rent payment that a new lease owner could default on for the remainder of the lease. If you are agreeing to pay landlord’s legal expenses in disputes, you can also add them to your total financial exposure.
Lack of freedom to sell your practice
Many healthcare practitioners have been shocked to learn that when they ask their landlords to assign the lease to a prospective buyer, it triggers an automatic termination of the lease. Also, you can find some landlords threatening termination unless you pay them ‘key money’, a hefty amount of thousands of dollars. If you choose not to pay it, you could impede your ability to sell your practice and also might have to relocate your business in your final working days.
So when signing a medical office lease, you should see that you will be free to assign your tenant lease to a medical practitioner who wishes to buy your practice when you decide to retire. Assignment provisions are part of every medical office lease. Make sure your lease includes this clause since it will determine your ability to sell your medical practice. Valuable assistance of proficient business valuation services can help you include all essential clauses in your lease.
Risk of no authority to protect your lease
You are not powerless when it comes to signing a lease agreement of your medical office building. Professional commercial real estate appraisers can help you identify hidden clauses that are often tucked away in the details of a lease and take appropriate steps to safeguard your interests. They evaluate your lease and identify various parts of the lease that might impede your ability to sell your practice or smooth retirement. Healthcare tenants with leases expiring in two or three years should create a negotiating strategy with efficient professional help to renew their lease, providing them the freedom to make career choices without paying penalties to the landlord even after they retire.
By learning these risks and valuable guidance of real estate appraisers, you can identify and avoid all possible risks when signing a medical office lease.