“I agreed to what?!”
“I did not realize I could negotiate.”
“We did not view our lease as an asset.”
Do any of the above sound familiar? Today’s office lease is one of the practitioner’s greatest assets. When reviewed, analyzed, negotiated and executed properly, one easily see how an office lease will add to the value of the practice. Unfortunately, far too many practitioners find themselves wishing they took the time to have a skilled attorney review their office lease prior to signing.
The result? Anywhere between 10 and 20 practitioner-unfavorable provisions that impact the value of their practice.
Chances are, if your lease was written prior to 1980, there are mutually beneficial provisions for landlord and tenant. Over the last 30 years, landlord attorneys have creatively changed the office space landscape.
Our court system may or may not help. Some state courts will draw the proverbial line in the sand, that is, to protect tenants from placing their signature onto an unfavorable lease. But for every tenant friendly state, there is an equal and opposite landlord friendly state that will seek to protect the law of the contract.
How to protect against the unknown? Have a qualified attorney review and negotiate your office lease.
Some of the more obvious clauses your professional practice attorney should review include:
1. Term & Termination – the length of the lease and renewal options, including notice provisions
2. Recapture – allows the landlord to terminate a lease if the practitioner asks for an assignment or sublet
3. Extension (“Personal Option”) – allows only the practitioner to renew; making it personal to the practitioner-only
4. Assignment/Sublet – crucial when the practice wants to expand, space-share, or sell
The following are some “must” review aspects of a lease to avoid impacting the value of the practice:
1. Exclusivity – allows the space to continue to be rented to a medical/dental practitioner only
2. Premises Damage or Repairs & Maintenance – these sections are often laden with ways in which a landlord can get “out” of making timely repairs that will affect the ongoing activity of the practice
3. Release of Liability – should be examined to determine whether personal liability will be extended beyond the lease term
4. Use and Care of Premises – if not filled-in appropriately, this allows a landlord to recoup for any unauthorized use
5. Subordination, Non-Disturbance and Attornment – these clauses outline and define the relationship between lenders to the landlord (current and future) and how the tenant may be affected if the lender ever forecloses on the property
6. Hold-over – a penalizing clause that defines the period when a current lease ends and prior to the negotiation of a new lease. Miscalculations of the time it may take to build out a new practice space (and thus, not allowed to occupy a new space) are one reason why this clause must be favorable to the practitioner.
The 10 examples above are some common provisions found in today’s medical/dental office lease. Far too often these provisions leave a practitioner without recourse when they are accepted as-is. The danger is compounded when the lease is being negotiated by a new medical practitioner – who may be stuck with unfavorable clauses to begin her career.
An attorney qualified to represent professional practices clients can review and negotiate the most practitioner-tenant friendly provisions on your behalf. The result of such work will be the protected value of your practice.