How to do everything better: Negotiating rent with a clinic

Rent can be your medical clinic’s biggest expense. Before entering into negotiations and signing a lease, it’s important to understand your rights and obligations so that you are not stuck with hidden costs or other surprises—and so you can reach an agreement that meets your needs. “Generally speaking, physicians are very good tenants. Landlords recognize and value that, so you can leverage that,” said Huy Lam, principal at Periscope Realty in Toronto, which specializes in healthcare properties. “Also, from a landlord’s perspective, they want a physician who generates foot traffic. So depending on what type of medicine you practise, you may be able to negotiate better rates.” Read: Consolidated Canadian guidelines for treating opioid use disorder Here are some tips to help you negotiate a lease that will work to your advantage: Find out about inducements: Lam recommends asking the landlord about inducements. For example, you may be able to negotiate for a few months of free base rent or to have the landlord pay for renovations or to finance them over the term of your lease. Research market rents: Before negotiating, Lam suggests getting an idea of market rents in the neighbourhood. You can talk to a commercial realtor to get up-to-date market lease rates, which could help you negotiate a lower rent. Lam says that often the landlord will pay the realtor’s fee. Be aware of all costs: “People just look at how much space they are getting and the monthly rent. I want people to think about the total cost of the contract,” said Dr. Alykhan Abdulla, medical director of the Kingsway Health Centre near Ottawa. “Who is responsible for what? If the power shorts out or the elevator needs to be fixed and you work on the top floor. . . . In one of my buildings, the toilet broke down and it became my responsibility.” Dr. Abdulla also says to find out about the financial penalties surrounding terminating the contract. Also, be sure to understand when and how the lease will be renewed and whether you have the option to renew. Read: Canadian seasonal influenza vaccine guidelines for 2021-2022 Lam suggests looking at property tax increases over the past few years to get an idea of what you may be paying. Also consider maintenance costs, such as roof repairs or repaving the parking lot. “The cost is generally amortized over the lifetime of the property, so it’s hard to get a handle on additional costs. Just be cognizant of what historical additional costs have been in the building so you can plan going forward,” said Lam. Choose the length of the contract: A typical lease term is five years, Lam says. A shorter contract gives you more flexibility while a longer contract provides more security in your payments, he says, adding that due to the expense of setting up a medical practice and providing stability to patients, physicians usually remain in one place long-term. “If you extend, after the first five years, there may be a demolition clause,” said Lam. “This means if they sell the building to a developer or if they demolish the building, they can terminate the lease without cause or a penalty. You may be able to negotiate compensation if that does happen.” Be familiar with contract types: “A lot of people look at what the monthly rent is, but they don’t know about things like triple rent adjustments. So if they do any upgrades in this particular building, you have to pay your proportionate share on those,” said Dr. Abdulla. “A lot of people don’t know that and they just think they are getting a great deal.” Read: Does diet play a role in adult acne? For example, according to the Business Development Bank of Canada, in a gross rent lease, you pay a single amount to the landlord for base rent and utilities, property tax, insurance, maintenance, repairs and services, such as snow removal and grass cutting. In a net lease, you usually pay for the base rent plus one of the following: property taxes, insurance or utilities. Your landlord pays for all other expenses. In a double net lease, you pay base rent plus property taxes and insurance. In a triple net lease, or triple rent adjustment, you usually pay base rent, plus property taxes, building insurance and utilities, as well as other operating and maintenance costs. Think about location: “It’s not just about picking a place and getting a good lease amount,” said Tammy Rea, regional manager, professional banking at TD Business Banking in Surrey, B.C. “I think it’s really important to know who the providers are around you. See how many other allied care providers are close by who you may want to work with. What are the demographics in the community? Do you prefer working with seniors or young families? What’s the future growth plan of the community?” Read: KETO QUIZ: What do you know about low-carb diets? Other location-based factors to consider include parking spaces, says Rea. Are there enough spaces for you and the other tenants? Will you be able to attract locums? “If you are in a more expensive area, you may pay a premium, but it may be easier to attract physicians to join you who can help provide services and share the costs,” Rea said. Consult a professional: It is important to take your time to make sure you understand your lease agreement, says Lam. He also suggests reaching out to a commercial real estate professional or commercial lawyer for advice. Consider buying: Rea suggests physicians consider purchasing a building as an investment instead of paying rent. “The clinic can then pay the lease and you have the equity that’s building up in a commercial property,” she said. “If you’re going to settle in for the long haul, why would you not purchase? You would have a lot more control and you know that you’re not going to have a new landlord come in and jack up your lease or have a demolition clause that causes you to relocate.” Read: Study links depression to nutrition in middle-aged and older Canadians

How to do everything better: Negotiating rent with a clinic

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