Medical Office Rent: Reasonable Rates

12 Sep 2009

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

Many medical tenants prefer to do their own janitorial work. If biomedical tenants do their own janitorial work, then, from the tenant’s perspective, the general janitorial expenses for the building should be backed out of the CAM Charges passed on to the biomedical tenant. Medical tenants use hazardous materials and generate biomedical waste. Medical tenants can use X-ray machines, CT scans, and other machines which may generate harmful radiation. To preserve the integrity of these machines, medical tenants also have specialized needs to avoid interference with these machines.

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

Since many office leases contemplate that the landlord will hire the tenant finish contractors, the language in those leases often doesn’t address construction problems. A precise construction plan should be agreed to in advance.

The landlord needs to have an opportunity to verify that the tenant’s needs for HVAC, plumbing, electricity, and other infrastructure needs fit the building’s capacity. Some representative of the landlord should have an opportunity to inspect the work in progress.

Operating Expenses and Taxes. While some leases simply provide for a monthly rent, others also require the tenant to reimburse to the landlord a share of the operating expenses and taxes for the property. While there are many subtle changes that can be made to these provisions by an experienced real estate lawyer (depending on the form that the landlord is using), at a minimum a tenant should expect to receive a photocopy of the real estate tax bill for the property (as opposed to simply receiving a statement from the landlord) each year, to verify that he or she is not being overcharged. Likewise, the landlord’s statement of operating expenses should be reasonably detailed and the tenant should be afforded an annual right to review and audit the landlord’s books and records relating to both operating expenses and taxes, in order to verify that charges have been correctly computed by the landlord.

Services. It is a common mistake to assume that your new landlord will provide certain basic services to your space. Recognize that the landlord is not bound to provide services beyond those expressly stipulated in your lease. For this reason, you should carefully review the provisions of your lease that specify the services that the landlord will provide.

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