Medical Office Rent: Availability and Low Rates

As health care providers compete for patients, they seek locations convenient for patients. This phenomenon has driven clinics, urgent care facilities, and other health care providers into general office and store front retail space

If you are acting without benefit of counsel, you will make sure that the business terms (rental rate, length of lease term, landlord allowances, and the like) match your discussions with the broker, and then you are apt to sign the lease, perhaps assuming that all of that “legal boilerplate” in the fine print is standard in every lease and basically not subject to negotiation in any case. All too often, the failure to carefully review and negotiate those boilerplate provisions may come back to haunt you down the road.

As health care providers move into space previously finished for general office or retail space, they typically need substantial remodeling. Landlords generally like to have tenant finish work done by contractors with whom the landlord has had a prior relationship. In many situations, the landlord controls the contractors who perform the tenant finish work

Yet health care providers may seek specialists to finish the leased premises. The landlord may acquiesce to allow the tenant finish work to be done by contractors with whom the landlord has no prior relationship

The underlying problem is fairly simple. In the typical medical office lease, the landlord undertakes the construction of certain improvements in the premises prior to turning the space over to the tenant for occupancy. As a new tenant, you expect to walk into your finished office, move in your furniture, and then begin paying rent on the day you open for business. All too often, however, the lease provides for a fixed date on which rent will commence to be payable and there is no provision for delaying that date if completion of the landlord’s work is delayed.

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.

It is common for office leases to contain provisions requiring the tenant to consent to a substitute premises should the landlord decide that it is in the landlord’s best interest to move the tenant from one suite in the building to another. Because of the specialized build-out needs of the medical tenant, medical tenants are more likely to resist these provisions.

Virtually all office and retail leases contain provisions addressing the landlord’s and tenant’s rights and responsibilities regarding restoration obligations at the end of the lease. These provisions need to dovetail with the special situation of a medical tenant.

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