By Tenant Advisory Group · Updated
Short answer
Choose a medical office broker who represents the practice and not the landlord, understands clinical build-outs and lease issues, tells you how they are paid and is ready to work with your healthcare attorney. Ask about conflicts, who will actually do the work and how alternatives will be tested. Check references from practices like yours and verify the license.
Start with whose side the broker is on
A listing broker is hired by the owner to lease or sell a building, and the owner's interests come first. That broker can be pleasant and well informed, and can still be working for the other side of your deal. A tenant-side broker, or tenant representative, works for the occupier: finding options, comparing them and negotiating against them.
The distinction matters more for a practice, because so much of a clinical lease sits outside the rent. Allowance, exclusives, restoration, change of control and guarantees are all places where landlord and tenant want different things. Some firms do both sides, representing landlords on some buildings and tenants on others. Ask how the firm addresses that. If a broker recommends a building it also lists, you should know that before you tour.
What medical knowledge should look like
A broker need not be a clinician or a lawyer. A useful broker should recognize what makes this lease different, know when to bring in the right specialist, and be able to explain why a suite that tours well may still fail. Listen for specifics when you talk.
- Build-out. Can they discuss plumbing, power, shielding and second-generation space, and how those drive the allowance? Can they suggest architects and contractors with clinical experience while leaving the choice to you?
- Location. Do they start from your patient and referral geography, or from what is available?
- Lease terms. Can they explain use clauses, specialty exclusives, change-of-control language and guarantee limits in plain terms?
- Compliance awareness. Do they raise the possibility of Stark and Anti-Kickback review when a landlord is a hospital or other referral source, and hand that question to counsel without trying to answer it?
- Buying. If a purchase is an option, can they compare the two paths and work with your CPA and lender?
Be wary of anyone who gives you legal conclusions. A broker who says a lease is Stark compliant is outside their role. Attorneys at Frier Levitt caution against relying solely on a commercial broker without healthcare-focused legal counsel. A good broker should welcome your attorney, not work around them.
Questions to ask before you hire
- Do you represent landlords as well as tenants? Do you or your firm list any building you might show me?
- Who will do the work day to day, and how often will I hear from them?
- Which medical, dental or therapy practices can I speak with about a comparable project?
- How do you find options that are not actively marketed?
- How will you compare buildings over the full lease term, including allowance and build-out cost?
- How do you get real leverage if we would rather stay in our current building?
- When do you bring in an architect, attorney or CPA?
- What is your timeline for a practice with our requirements?
- How are you paid, by whom and when, and will you put that in writing?
- What is the term of your agreement with us, and how does it end?
- Is your license active in this state, and who is your supervising broker? Can I verify that with the state regulator?
When you check references, ask about more than the outcome. Ask whether the broker pushed back on the landlord, told the practice things it did not want to hear, and stayed involved through construction and move-in. Ask what they would do differently. A reference for the wrong kind of deal tells you little, so look for similar size and type.
How brokers are paid
In a standard commercial lease, the landlord typically pays the commission for its own broker and the tenant's, under arrangements set by contract. That is a custom, not a law, and purchases, some subleases and small deals can work differently, as our guide on who pays a tenant rep broker explains. Ask how payment works in your case, and make sure you understand what a commission arrangement could mean for the advice you get. Northside-Suburban Pediatrics Associates described its reaction to that arrangement this way:
“We thought it was quite amazing that not only was he able to negotiate for us to pay less in rent, but also that the landlord compensated him for it!”
Commission structures can reward a larger or longer lease. Ask the broker how they address that, and whether they would tell you to take less space or a shorter term if that served you better. If the landlord or the seller could be a referral source, mention the commission to your healthcare attorney as part of the overall review.
How TAG works with practices
Tenant Advisory Group is a Chicago-based tenant-rep and buyer-rep brokerage that also works nationally. It was founded in July 2008 by Bill Himmelstein, and represents occupiers, not landlords or sellers of investment property. Its figures are $1.5B+ in transactions, 500+ transactions and $350M+ saved for clients across all sectors. It works with medical, dental and therapy practices among other occupiers.
An engagement with a practice follows these stages, adjusted to your deal:
- Learn the practice: patients, referrals, services, growth, partner goals and lease dates.
- Set the timeline, working backward from your dates and build-out needs.
- Identify options and tour them, including your current building as a real alternative.
- Bring in your architect and engineers for test fits and pricing where needed.
- Request written proposals, and compare them on the same basis over the full term.
- Negotiate the letter of intent, including clinical items that are harder to win later.
- Work with your attorney on the lease, leaving legal and compliance decisions to counsel.
- Stay on through build-out, commencement and any questions on dates and allowance.
Frequently asked questions
Do we have to pay a medical office broker?
In a standard commercial lease the landlord typically pays the commission, but it is set by contract and can differ, especially in purchases and small deals. Ask how it would work for you, in writing.
Can a broker tell us whether the lease complies with Stark?
No. A broker can flag the issue and supply market evidence, but your healthcare attorney decides whether the lease fits a Stark exception or an Anti-Kickback safe harbor.
Should we use the broker from the building we like?
That broker is representing the owner. You may speak with them, but consider having your own representative before you share your budget, timing or alternatives.
Is a local broker better than a national firm?
What matters is the knowledge of your patient area and clinical space, and who will do the work. Ask for examples in your market and meet the actual team.
Sources
This guide is general information, not legal, regulatory or tax advice. Have healthcare counsel and your CPA review any transaction before you commit to it.