Negotiating lease terms

October 22, 2010

Know your lease terms and how these will impact decisions you make in practice.

A: It all depends on the terms of the lease and its length. The first area to review is any clause that addresses "pass through" costs. Many leases have clauses that pass through costs such as taxes or insurance or the care of common spaces. Some of these costs may have decreased without anyone alerted that the decreases are passed along to the tenants. If the lease does not contain any periodic rent recalculation clause, the only option is to renegotiate. If the lease is scheduled to expire soon, nothing prevents you from renegotiating the terms and committing to more years for an immediate rent relief period of some kind.

If your office has too much space or unused space, you could negotiate for the same rent on a smaller footprint, also saving on office costs. Even though real estate leases are very well-defined documents, they are agreements, and any agreement can be re-opened by willing parties. A good medical practice is an extremely attractive renter, and you should not be afraid to seek new consideration from your landlord in these troubled economic times.

Answers to readers' questions were provided by A. Michael La Penna, The La Penna Group Inc., a healthcare strategic and financial consulting services firm in Grand Rapids, Michigan. Send your practice management questions to medec@advanstar.com