How to Negotiate a Lease for a Medical Practice

With the exception of the acquisition of certain types of equipment such as MRI machines and investments in facilities such as ambulatory surgical facilities, a physician’s office space will be the biggest financial investment made in connection with the operation of his or her practice. Aside from the fact that a physician’s office space will project an image for the physician, the office space can be a major factor in the success of the medical practice.  This is not just because location and amenities can affect accessibility and convenience for patients, but also because a real estate lease can facilitate or impede the operation of a practice and can provide certain competitive advantages and disadvantages. Therefore, it is crucial that physicians critically evaluate the business terms and legal requirements contained in a real estate lease and be prepared to undertake extensive negotiations to obtain the best deal possible.  We recommend the following for negotiating a lease for a medical practice:

  • Be prepared to negotiate and assemble your team
  • Obtain confirmation that the space is suitable for medical use
  • Make certain that your lease and the leases of other tenants in a multi-tenant building protect your specialty
  • Review the landlord’s rules and regulations
  • Beware that triple net can mean more than triple the cost
  • Reserve a realistic right to audit
  • Take steps to protect your security deposit
  • Consider subleasing and renewal options
  • Be sure the lease includes a requirement that the landlord obtain a non-disturbance agreement from all existing and future lenders
  • Do not overlook signage

The above was excerpted from The Physician’s Comprehensive Guide to Negotiating’s chapter on Negotiating a Real Estate Lease for a Medical Practice written by Lisa D. Taylor, Esq.  Ms. Taylor is a partner with Stern & Kilcullen, L.L.C. in Roseland, New Jersey. She is serving her fifth term as Vice Chair of the American Health Lawyers Physician Organizations Practice Group and is a member of the Board of Directors of the New Jersey State Bar Association Health and Hospital Section for which she previously served as Chair. Ms. Taylor received her B.A. from Barnard College of Columbia University, her M.A. and J.D. from Duke University and is licensed to practice law in New Jersey, New York, Pennsylvania, Florida, Tennessee, and the District of Columbia.

Steven Babitsky, Esq. is a negotiating consultant and founder of SEAK, Inc., an ACCME accredited continuing education company.  Steve has trained thousands of physicians.  He is  the co-author of The Physician’s Comprehensive Guide to Negotiating and Never Lose Again, Become a Top Negotiator by Asking the Right Questions and is the presenter on SEAK’s highly-acclaimed DVD negotiating training program for physicians, Negotiating Skills for Physicians.