5 Mistakes Made By Doctors When Leasing Medical Office Space

  • 3 years ago
  • 1

Mistakes Made By Doctors When Leasing Medical Office Space

A search for a suitable property for your medical practice is a laborious and time-consuming process. Physicians and other healthcare professionals should make the most straightforward land and space planning decisions for their practices. Medical space is significantly different from traditional office space with its own set of challenges that need proper consideration when leasing such space. Often doctors make some mistakes when signing a replacement medical office lease that leads to struggle.

While there are many key concepts and methods you need to always do before leasing, you need to avoid an equal or more significant number of mistakes.

Five Mistakes Doctors Make When Leasing Medical Office

Here are some of the significant common mistakes healthcare professionals make during lease:

Signing a Private Guarantee

Landlords always prefer personal guarantees; however, you should not opt for this option as a tenant. Personal security is a legal contract between a landlord and tenant to ensure a business’s selected obligation, usually the remaining rental obligation under a lease. Personal guarantees provide the owner with additional recourse within the event of a default lease agreement. Personal security implications are significant because your assets (e.g., house, cars, retirement funds, etc.) are in danger if you have to default your lease. The owner will tell you the high cost of the tenant improvements that are often needed for medical office space creates additional risk.

The owner who owns a medical office block should expect a high level of tenant improvements to be required. Further, the rental rate for medical office space is usually higher due to the owner’s tenant improvement contribution. It is often nothing quite a straightforward application of risk and reward. Yes, there’s a risk to the owner during a land lease transaction, but that’s why the rental rates for medical office space are above those for traditional office space.

Underestimating the value of Tenant Improvements

Tenant improvements for a medical office suite are often costly. It’s essential to know the implications of the suite’s present condition and the way that affects the purchasing power of every tenant improvement dollar the owner is providing. A $25-per-square-foot allowance for a second-generation practice could also be adequate. Still, an equivalent allowance will barely get you started if you’re building out from a “cold shell.” The purpose is to know what you’re stepping into before signing a lease.

Our team helps you assess an area’s present condition by developing an in-depth and competitive allow the development project while you’re still evaluating your options.

Lack of Awareness about Market Availability & Competition

The foundation of a successful negotiation starts with understanding your other viable options, how they compare to each other, and how to execute them. When handling landlords or sellers, many healthcare providers attempt to bluff their way into and thru negotiations. A savvy landlord or seller can often read a bluff from a mile away. Trying to wing it in these scenarios won’t work! This approach typically leads to less respect from a landlord and, therefore, the exact opposite results you were hoping for.

If you’re getting to achieve success in your next negotiation, understanding market availability and comps is the first place to start. You’ll hire representation to try to do this for you. Otherwise, you can invest dozens of hours yourself into the method.

Blind Trust on the Landlords and Their Agents

In a lawsuit, it’s illegal, unethical – and even illogical — for an attorney to represent both the plaintiff and, therefore, the defendant. There’s an apparent conflict of interest. The agents’ interests are in lockstep with their landlord employers, and their singular aim is to maximize the rent paid by the medical tenants.

On the other hand, tenants want to pay less rent. And yet, many unsuspecting physicians trust these same landlord/full-service agents to advise them in their land negotiations. These physicians are often later disappointed that their agent didn’t do more for them within the negotiations.

Not Giving Yourself Enough Time

Adapting a medical office to medical practice requires enough time for re-evaluating the leasing process. Planning a proper business budget for a project takes more time than you have planned for.

When leasing a medical property, even a common mistake can lead to significant financial hardships. Avoiding these common pitfalls while improving your chances of finding the right space and maintaining an excellent landlord-tenant relationship while using is essential.

Join The Discussion

Compare listings

Compare