Rent the Right Way: Medical offices require unique leases

Services Provided

Too often, physicians wrongly assume that a landlord will provide certain basic services, but a landlord is only legally required to provide the services expressly stipulated in the lease. Often, for example, landlords turn off a building’s air conditioning at night and on weekends. If your practice provides extended evening or weekend hours, the lease should stipulate that air conditioning will be provided to accommodate your practice’s schedule. Similarly, medical practices rely on some types of equipment, such as X-ray machines, that consume significant electrical resources. The lease should clarify whether the landlord will furnish the necessary amount of electricity or will charge separately for such extensive use. If the latter is the case, the lease should further provide the basis for those charges (separate meters or usage audits, for example). If the premises will be metered separately, then the tenant should receive an offsetting deduction for the operating expenses. Similarly, if your practice generates medical waste or hazardous materials, the lease should identify guidelines for waste disposal, including who will dispose of such material and the manner in which it will be collected.

Operating Expenses and Taxes

As a tenant, you want clarity regarding all monetary obligations. Some medical office leases require you to simply pay the established monthly rental rate. Others require pro rata payments of some or all of the landlord’s operating expenses and real estate taxes associated with the property in addition to the monthly base rent. Operating expenses may include the costs of operating, maintaining, repairing, insuring, lighting, cleaning, painting and securing the property and its common areas. Because these expenses are not static, your monthly payment obligations may be unpredictable.

It is important for you to understand whether you are a party to an office lease that requires the proportional payment of the building’s operating expenses and taxes. Don’t be fooled, however; tenants pay these operational expenses one way or another. The difference is whether these fees are already included in the monthly base rent or are added to the monthly rent. If you are required under the lease to pay the operating expenses and taxes and fail to do so, you could be in default of the lease and be subject to monetary penalties, eviction or a lawsuit.

In order to minimize your financial responsibility for these operating expenses, you should verify that the landlord’s operating expense calculations are correct and that you are not being overcharged. It’s important to understand how these charges are estimated and what your pro rata share will be. If the operating expenses include real estate taxes, you should request an annual copy of the tax bill. In addition, you should have the right to annually review and audit the landlord’s books and records relating to operating expenses and taxes, to verify that the charges have been accurately calculated.