Have you or someone you know negotiated a lease without a professional and don’t know if your healthcare office lease is an asset or a liability? In this episode of Finding MOB, I’m going to show you three assets and three liabilities that can make or break your next leasing contract. We’ll find out why one of the fastest ways to throw money and time down the drain during a lease process is not knowing what makes a good or bad contract.
Asking The Right Questions
The first reason this is important is that many healthcare leaders and business owners don’t know a good contract from a bad contract. For example, you have to answer these questions to know if your contract is an asset or a liability. Who’s representing the landlord, and who is the landlord? What’s the condition of the space?
How much is the rent going up each year? What could delay me getting into my space? Who’s negotiating my business terms? Who’s negotiating the legal terms in my contract? These are all the questions you need to ask.
Assessing The Situation
Now that you know what questions you need to ask, let me help you diagnose the situation so you can see more clearly what I’m talking about. First and foremost, you must look at the landlord and the agent representing the landlord. A mom-and-pop landlord is going to do things differently than a corporate landlord. You’ll want to do your research because there are pros and cons to both.
You also want to beware of what we call resi-mercial agents. These are residential agents that want to do commercial real estate but aren’t trained to do so. Also, the condition of the space is vital to know if you plan on building out your office space.
It’s important for your agent to compare how much the landlord will contribute. With the consumer price index reaching 7.5%, it’s safe to say that a 3% escalation in your rent is an asset. However, that can quickly become a liability if your rent and rate is way above market.
Working With An Agent
Working with a professional agent allows you to limit potential problems, navigating through any pitfalls. Our team does over 100 healthcare deals a year; in each of those deals, we negotiate what’s called an LOI. This is a letter of intent that navigates through the business terms of the deal.
In each of these deals, we negotiate the business terms that are in the best interests of our clients. Your contract has become a liability before you even get to drafting a lease. While lawyers are an asset, you need to hire the right one at the right time. An experienced healthcare attorney works smoothly with a commercial real estate agent, working together to address any issues in the lease.
A Caution About Lawyers
Look out for lawyers that deter you from working with a commercial real estate agent. To put this in context, we have seen what can happen firsthand when clients go out of their lease contract alone. For example, we’ve seen a potential client spend tens of thousands of dollars on attorney fees just on the letter of intent.
The attorney had no idea of their budget, their timeframe, or if they could even operate their business there. So if a landlord is trying to persuade you from not having professional representation, that’s a serious red flag and an indication that your lease could become a liability. I’ve worked with clients that have delayed their lease by months—and even years—because they didn’t hire professional help to guide them.
I’m Here To Help
I hope this helps you understand what in the lease contract can make it a liability and what you can do about it in the future. If you have additional questions about your lease, contract, or have questions about opening up your own healthcare location, contact me directly and I’ll be happy to help.
Make sure to subscribe to my channel so you never miss an episode of Finding MOB, where we make you an insider when it comes to owning or leasing healthcare office space property. Stay tuned to see what I feature next!