Medical Office Rent: Availability and Low Rates


Health care rent is not like a commercial office rent. In addition to base rent, most commercial tenants pay some or all of the landlord’s operating expenses (“CAM Charges”). Yet medical tenants need to cope with the disposal of biomedical waste and have greater privacy concerns than many tenants.

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.

Medical uses usually violate the boilerplate use provisions in most retail and office leases. In addition to modifying the use provisions, landlords and tenants should consider the representations and warranties within the lease, together with the hours of operation. Patients are more likely than the general public to have special access needs. Buildings containing health care providers are more likely to receive ADA scrutiny.

Though, as a practical matter, the tenant’s use may trigger the need for ADA compliance, the tenant will want to avoid lease language obligating the tenant to pay any of the costs that the landlord incurs to bring the building into compliance with ADA. While medical tenants generally bear the responsibility for finishing the lease premises consistently with the ADA, tenants will want to consider excluding the general building ADA compliance charges from the list of expenses passed through to the tenant.

The underlying problem is fairly simple. In the typical medical office lease, the landlord undertakes the construction of certain improvements in the premises prior to turning the space over to the tenant for occupancy. As a new tenant, you expect to walk into your finished office, move in your furniture, and then begin paying rent on the day you open for business. All too often, however, the lease provides for a fixed date on which rent will commence to be payable and there is no provision for delaying that date if completion of the landlord’s work is delayed.
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As a result, a tenant with a May 1 rent commencement date may find that, due to construction delays, the space is not ready for occupancy until May 5, but the landlord nonetheless bills the tenant for rent retroactively to May 1. Further, if the lease simply states that the rent commences on May 1, the landlord is legally entitled to collect rent from that date. It is therefore incumbent upon the tenant to make sure that the lease provides that rent will not commence until the landlord’s work has been completed and, ideally, the tenant has been afforded a day or two thereafter within which to take occupancy.

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.

Virtually all office and retail leases contain provisions addressing the landlord’s and tenant’s rights and responsibilities regarding restoration obligations at the end of the lease. These provisions need to dovetail with the special situation of a medical tenant.

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