Rent the Right Way: Medical offices require unique leases

As tenants of medical office spaces, physicians often create special leasing issues. Medical tenants use hazardous materials, generate biomedical waste, demand confidentiality of patient records and require compliance with occupational safety standards—all unique aspects of the medical profession. Yet, often, physicians will sign “form” medical office lease agreements provided by the landlord without the benefit of legal counsel. Typically, the landlord provides a standard fill-in-the-blank lease form with the tenant’s name and the general business terms (including the term of lease, rental rate and commencement date). Tenants may gloss over the legal boilerplate provisions included in the lease agreement, assuming that these terms are standard to all leases and are not subject to negotiation.

While it is tempting to sign the lease on the spot, you should have an attorney experienced in medical office leases review the standard lease agreement and negotiate certain provisions. In fact, in the current real estate recession, there may be even more leverage to negotiate desirable terms and address the special characteristics of your tenancy. Because a medical office lease is a large expense that often requires a multi-year commitment, you do not want to be a party to an agreement that is not reflective of you and your practice.

Improvements to Premises

Standard form medical office leases usually have two differing approaches to the situation in which a physician makes improvements or alterations to the rented premises. The first approach provides that at the end of the lease term, the tenant is required to remove all improvements and alterations installed within the rented premises during the lease term, and must be responsible for any damage caused by the removal. The second approach provides that, at the end of the lease term, all improvements and alterations become the property of the landlord and cannot be removed from the premises. A tenant who is unaware of the particular terms in the office lease may find an unexpected expense awaiting him or her at the end of the lease.

While a particular landlord’s medical office lease may contain a variation of the two approaches described above, the lease can be modified to state that any and all trade fixtures, furniture and furnishings paid for and installed by the tenant will remain the property of the tenant upon reaching the end of the lease. Any damage caused by the removal of the fixtures or furniture will be the responsibility of the tenant.