Medical Office Lease Checklist

Attorneys at Frier Levitt note that standard landlord forms are drafted for general office or retail tenants and are poorly suited to the operational, regulatory and clinical realities of healthcare businesses. A checklist will not rewrite a form, but it tells you where to look.

Start it before the letter of intent. Business points such as the allowance, exclusives and transfer rights are easiest to settle while the landlord is still competing for you. Epstein Becker Green's attorneys make the same recommendation for assignment and subletting: address them in detail in the letter of intent. TAG can work through items like these on the business side as a tenant-side advisor, and your healthcare attorney handles the drafting and compliance review. Lease law varies by state and leases vary by deal, so treat each line as a question, not a rule.

• ✓Does the permitted use cover what we do today and the services we expect to add, including procedures, imaging, lab and in-office dispensing?
• ✓Do any other tenants' exclusives or building restrictions limit our specialty or services?
• ✓If the building is hospital-affiliated, are there staff privilege requirements or restrictions tied to the hospital's mission?
• ✓Do we have an exclusive for our specialty, and what happens if the landlord breaches it?
• ✓Does the hazardous materials clause allow the materials we actually use, and say who disposes of them?
• ✓Who arranges and pays for medical waste handling?
• ✓Are our hours covered, including early, evening and weekend clinics?
• ✓Do we get building-standard signage, directory listing and enough parking for patients and staff?

• ✓What exactly is included in rent, and what is passed through as operating expenses?
• ✓Is there a cap or audit right on operating expenses?
• ✓Is the suite separately metered, or could we be charged for higher use on a formula we cannot check?
• ✓Does any limit on electrical consumption fit our imaging and clinical equipment? Winstead's attorneys warn that a watts-per-square-foot limit or a typical-tenant standard may not be sufficient for a medical tenant.
• ✓What does after-hours HVAC cost, and how is it billed?
• ✓Is rent set in advance for the full term, including escalations?
• ✓Does a concession or allowance come from a landlord that could benefit from our referrals? If yes, has counsel reviewed it?

• ✓Does the work letter cover clinical items such as plumbing to each room, added power, shielding and medical gas if we need them?
• ✓Who controls design, contractor selection and change orders?
• ✓What can the allowance pay for, and what is excluded?
• ✓When does rent start, and what if the landlord delivers late?
• ✓Do we have to remove lead shielding, cabling, casework or other specialty installations at the end of the term? New York Real Estate Journal's guide to medical leases flags this as a point tenants will want to settle at signing.
• ✓Can we install compressors, vacuum pumps or other equipment outside the suite, and on what terms?
• ✓Have we confirmed which local and state approvals our equipment and rooms need?

Three federal topics show up in most clinical leases. Each has its own guide in this resource center, so this list only tells you what to ask.

• ✓Can referrals flow between us and the landlord, a landlord affiliate or a subtenant? If yes, has counsel reviewed the lease against the Stark law rental exception and the Anti-Kickback safe harbor?
• ✓Does the lease say who handles ADA work in the suite and in common areas? The Department of Justice says landlord and tenant are both covered, and that the lease can allocate the work between them.
• ✓Does the lease address path-of-travel work that our alterations could trigger?
• ✓Are landlord entry rights limited to protect patient privacy and records? HIPAA requires reasonable safeguards, and attorneys warn that unrestricted access clauses can compromise them.
• ✓Do state and local rules on medical waste apply to our practice? EPA says medical waste is regulated primarily by state environmental and health departments, and that it is important to contact your state program first.

• ✓Can we admit new partners and let partners retire without landlord consent?
• ✓Does the transfer clause treat a change of control as an assignment? Frier Levitt notes that this is often overlooked and can interfere with routine physician turnover and healthcare transactions.
• ✓Are transfers to affiliates, successors and buyers of the practice permitted without consent?
• ✓If consent is needed, must the landlord be reasonable, and does it have a deadline?
• ✓Does the landlord have recapture or profit-sharing rights if we assign or sublease?
• ✓Who signs a guarantee, for how much, and when does it reduce or end?
• ✓What releases a departing partner from a guarantee?
• ✓If a solo practitioner dies or becomes disabled, can the estate cancel the lease or sell the practice?
• ✓May we share rooms with another provider, and has counsel reviewed the arrangement?

Frier Levitt notes that leases routinely allow landlords long restoration periods after a casualty or utility interruption before a tenant has meaningful termination rights, and that displaced patients do not simply wait; they seek care elsewhere. Read these clauses with continuity of care in mind.

• ✓How long can the landlord take to restore the space before we may terminate?
• ✓Does rent abate when we cannot see patients because of a building problem?
• ✓Is there backup power, or the right to install it, for refrigeration and critical systems?
• ✓Can the landlord relocate us, and does the clause cover the real time and cost of moving a clinic?
• ✓What renewal rights do we have, and how is renewal rent determined?
• ✓What notice date applies, and who is tracking it?
• ✓What is the holdover rent, and could a holdover create a compliance issue with a referral-source landlord?
• ✓What happens to records left behind if the lease ends unexpectedly?