How to Negotiate a Lease for Your Medical PracticeJan 09, 2023
At some point in your career, you’re probably going to have to negotiate a lease for your medical practice, so it’s important that you know how.
Educating yourself on the basic concepts of leases can help you make sure you don’t get stuck in a sticky situation.
Here are three helpful tips to keep in mind when negotiating leases.
Shorten the term
I know you think this is the perfect location and that you’re not going anywhere. But things change! Things come up and you may not need the space three or even five years down the road. You don’t want years and years to get ahead of you and then, all of a sudden, you have no way out.
I would advise no more than five years for a lease, because anything shorter and it may yield you a really high rate, and the landlord may push back on giving you a tenant improvement allowance, which is really important for you. It protects you in case you need to get out. By the time you realize you’re moving on, you only have a little bit left.
If your landlord is pushing for a really long lease, at least ask for the ability to sublease or assign it if necessary and have a burn off if there’s a personal guarantee so that ends in a few years.
Know your leverage
Remember to get important provisions in the lease that help you, and know your leverage. Healthcare entities are actually really good renters because they usually stay for a while and they’re busy quickly, but you don’t want to show your hand and let the owner know that this is the one and only property that you’re looking at.
Limiting yourself to one property puts your negotiation at the mercy of the owner or the landlord. Trust me, they can spot a tenant who has no other viable options or doesn’t know what they’re doing from a mile away. Push for shorter terms, mitigation language, and fewer shared expenses. And try to get all the tenant improvements you can.
Be aware of personal guarantees
Most landlords require that the tenants sign a personal guarantee on the lease. This can be really scary because it means that you, the doctor, are personally liable for the payment of the rent on the premises. If your practice folds, you are still liable for payment of the balance of the lease term, unless, or even if, you find another tenant for that space.
I have a lot of doctors asking me – do I have to sign these personal guarantees most of the time? Yes, but even if you do, you need to be careful. You won’t be relieved completely from payment until the original lease expires.
If the landlord does insist, which they normally do on a personal guarantee, here is the good tip: limit the time period. Try to only have the guarantee be for a year or 18 months, or maybe limit the amount of the guarantee altogether.
Whether you’re an independent practitioner, employed physician, or anything in between, you need to know how to negotiate a lease for your medical practice and maximize savings. If you’d like to dive into my tips further, check out Guard My Practice to gain knowledge on how to safely make more money for your practice, deal with malpractice, and more.
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