Medical Clinic Lease Agreement: Everything You Need to Know
A medical clinic lease agreement is a different type of lease and used specifically for medical practices which contain provisions unique to this field.3 min read
2. Buying vs. Leasing
Updated November 23, 2020:
A medical clinic lease agreement is a much different type of lease than would be used for normal lessees. These leases will be used specifically for medical practices and will contain provisions unique to this field.
What Makes Medical Clinic Leases Unique?
One of the biggest differences between medical clinics and other types of business is that medical clinics tend to stay in the same locations for extended periods of time. Because competition for patients is so stiff, however, many medical clinics choose locations that are not located on hospital campuses. The frequent development of urgent care clinic and physicians' offices in suburban areas is evidence of this trend. It's even become common practice for smaller medical clinics to choose locations in retail centers.
When a medical clinic rents office space, their lease agreement will usually be much longer than an agreement used by normal office tenants. Before signing a lease for medical office space, hiring a real estate broker with experience in this field can be a good idea. Retaining a tenant representative is also important.
As with any real estate search, finding a suitable location for a medical practice can be both expensive and time-consuming. The benefit of hiring a real estate broker is that they will usually understand how to find and lease an office space for a medical practice and will also know the right way to write a lease agreement so that it benefits the tenant and meets the needs of the clinic. When a physician rents an office space, special issues will usually need to be included in the lease.
Some unique issues that must be considered when writing a medical clinic lease agreement include:
- The need to handle hazardous waste and materials.
- Requirements for keeping patient records confidential.
- Compliance with OSHA standards.
A common mistake many physicians make when renting office space is signing a standard lease agreement without having it reviewed by a knowledgeable attorney. Generally, landlords will use a standardized form that offers blank spaces to fill in the name of the tenant and the terms of the lease.
If tenants aren't careful, they can overlook provisions that may make the agreement unfavorable. This is why it's always a good idea to have a lawyer review your lease agreement before providing your signature.
Buying vs. Leasing
Whether a practice will buy or lease an office space depends on a variety of factors such as the practice's needs and its long-term objectives. Financing can also be a major issue when it comes to deciding between leasing and buying.
For instance, if you've calculated the cost of financing an office space, including any improvements you may need to make to the building and your continuing expenses, and you find that your final costs would be about the same whether you lease or buy, then purchasing the property is usually the better decision. When you own a building, you will be able to build equity over time and will also be able to spread out your payments for improving the building instead of having to cover these costs all at once.
On the other hand, if you expect your practice to grow so much that you will eventually need a larger space, leasing is usually the best choice. Leasing can also be a good decision if you start a completely new practice. For one, you don't yet know if your practice will succeed for fail. Second, leasing when you first start out will allow you to focus your energy on caring for your patients instead of trying to renovate your office building.
Sometimes, when a medical practice purchases an office building, they assume they can defray the costs of the purchase by renting out the extra office space. While this makes certain sense, the reality is that having to fulfill the duties of a landlord can take time away from the medical practice, making renting out the space a poor decision. Instead of purchasing an entire office building, the better idea for medical practices is to buy an office condominium. This will provide the space that the practice needs without the necessity of managing an entire building.
If you need help with a medical clinic lease agreement, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.