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Medical Office Rent: Quality And Affordability

12.11.2009 | Author: John Greenwood | Posted in Office

Very often, the relocation of a medical office, and the subsequent negotiation and execution of a new lease, follows a well-defined pattern. After a certain amount of searching, one day a realtor shows you the perfect space, in the perfect location, and assures you that the lease will need to be signed as quickly as possible if you are not to lose the space to one of your competitors.

Many medical tenants prefer to do their own janitorial work. If biomedical tenants do their own janitorial work, then, from the tenant’s perspective, the general janitorial expenses for the building should be backed out of the CAM Charges passed on to the biomedical tenant. Medical tenants use hazardous materials and generate biomedical waste. Medical tenants can use X-ray machines, CT scans, and other machines which may generate harmful radiation. To preserve the integrity of these machines, medical tenants also have specialized needs to avoid interference with these machines.

While there is no substitute for the representation of experienced legal counsel when entering into a new medical office lease, understanding some of the most significant provisions in a lease will serve you well when undertaking the initial review of a “form” lease with which your broker has presented to you. Having a little understanding of the implications of the key legal provisions can save you a lot of money in the long run. The following is the first part of a brief checklist of some of the most commonly encountered provisions and a brief explanation of the potential implications of each.

Rent Commencement Date. Surprisingly, one of the points over which landlords and tenants argue most frequently is the date on which rent begins to be payable at the commencement of the lease term. Due primarily to poor draftsmanship, the question is often very gray and, unfortunately, the tenant often must begin to pay rent before he or she would have reasonably expected to be obligated to do so.

Generally, commercial leases the landlord the right to reenter a premises to show the premises to future tenants, inspect for compliance with the lease, allow the landlord access to make infrastructure repairs in the lease premises and elsewhere in the building.

As a result, a tenant with a May 1 rent commencement date may find that, due to construction delays, the space is not ready for occupancy until May 5, but the landlord nonetheless bills the tenant for rent retroactively to May 1. Further, if the lease simply states that the rent commences on May 1, the landlord is legally entitled to collect rent from that date. It is therefore incumbent upon the tenant to make sure that the lease provides that rent will not commence until the landlord’s work has been completed and, ideally, the tenant has been afforded a day or two thereafter within which to take occupancy.

Operating Expenses and Taxes. While some leases simply provide for a monthly rent, others also require the tenant to reimburse to the landlord a share of the operating expenses and taxes for the property. While there are many subtle changes that can be made to these provisions by an experienced real estate lawyer (depending on the form that the landlord is using), at a minimum a tenant should expect to receive a photocopy of the real estate tax bill for the property (as opposed to simply receiving a statement from the landlord) each year, to verify that he or she is not being overcharged. Likewise, the landlord’s statement of operating expenses should be reasonably detailed and the tenant should be afforded an annual right to review and audit the landlord’s books and records relating to both operating expenses and taxes, in order to verify that charges have been correctly computed by the landlord.

Services. It is a common mistake to assume that your new landlord will provide certain basic services to your space. Recognize that the landlord is not bound to provide services beyond those expressly stipulated in your lease. For this reason, you should carefully review the provisions of your lease that specify the services that the landlord will provide.

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