Complexity, Thy Name Is Medical Leasing

By Steve Barrett
Saturday, July 1, 2017

Medical office leases can be exceptionally complicated. Would-be tenants and landlords should seek sound legal advice before signing on the dotted line, The Woodlands, Texas-based Bailey Law Firm PLLC advises. The firm notes crucial areas of concern:

  • HIPAA Compliance — Landlords typically are granted some access for inspections, repairs and such. But it’s important to spell out limits on those rights in medical leases to protect patient confidentiality and avoid massive fines.
  • Waste Removal — Because of their expertise in disposing of medical waste, a medical tenant ordinarily handles this task. However, it is vital to ensure the lease covers this topic to head off any threat to public safety.
  • Accessibility — It’s great if the tenant and landlord agree a medical office should be accessible to the disabled. It’s less great if a lease fails to clarify who has the duty to ensure a facility meets legal requirements regarding access.

High Achiever in the Market

Medical real estate in the United States is a sturdy investment for multiple reasons, according to Wealth Migrate, a South Africa-based crowdfunding real estate company that has U.S. offices in Atlanta.

Among primary factors in the popularity of this sector, according to the company:

  • Purchasing and installing specialized equipment is costly and difficult, discouraging physicians from moving frequently and fostering long-term leases by high-caliber tenants.
  • The aging population is translating into greater need for and spending on health care.

The combination of these factors makes medical real estate comparatively more capable of weathering difficult economic conditions.

Medical real estate investment was ranked the most appealing asset class in real estate among American investors in the 2016 DLA Piper State of the Market Survey.

Medical Real Estate: Thinking Ahead

Decisions about medical real estate can arrive when you least expect them. Drawing on their market experience, healthcare consultants Pershing Yoakley & Associates PC and affiliate company Realty Trust Group point out key issues physicians should consider when it comes to real estate:

Slapdash consolidation invites trouble.

There are sensible reasons to consolidate physician group offices: cost control and clinical efficiency, for example. But planning is crucial. Consider a prospective facility’s location and mix of patient services, and look at the consolidated site from patients’ perspective to gauge market need for the office in a particular area.

Your big picture may need to be bigger.

Construction costs matter, but pay equal attention to lease and ownership agreements. Obliviousness to issues such as tenant improvement allowances has long-lasting impacts. Think about operating costs, too. While they might boost construction outlays, features such as energy-efficient climate control pay dividends.