Legal Considerations for Physiotherapists Entering a Commercial Lease

In Short

• Ensure the lease permits all necessary health services, including potential expansions, to avoid restrictions.
• Understand rent structure and potential increases, such as fixed rates, market reviews, or CPI adjustments.
• Include a renewal option and consider parking needs to support your clinic’s long-term success.

Tips for Businesses

When negotiating a commercial lease, prioritise clear terms for permitted use, rent increases, and renewal options. Verify parking arrangements and include exclusivity if possible. Consulting a leasing lawyer early can help you secure favourable terms, protect your interests, and minimise risks.

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Table of Contents

• 1. What Does the Lease Permit Me to Do?
• 2. How Much Rent Do I Need to Pay?
• 3. Options for Renewal
• 4. Parking 
• Key Takeaways
• Frequently Asked Questions

Are you planning to open a new physiotherapy clinic? If so, you will likely need to enter a commercial lease. A commercial lease grants you exclusive use of a premises for a specific purpose and period. Many health professionals consider the lease an afterthought, but ensuring it meets your clinic’s needs is essential. Signing a lease with unfavourable or inappropriate terms can lead to serious financial implications for your business. This article poses four key questions every physiotherapist should consider before entering a commercial lease.

1. What Does the Lease Permit Me to Do?

A commercial lease will outline what activities you can perform on the premises. The lease will grant you possession of the premises for a specified purpose. For example, if the lease allows for retail use, you cannot operate a physiotherapy clinic. Ensure that the lease includes health services such as physiotherapy, rehabilitation, and diagnostics as permitted uses. Consider future growth and potential expansion of services, like massage or acupuncture, to avoid restrictions.

Additionally, check the assignment clause. Some leases may not allow lease transfers unless the incoming tenant has the same permitted use. If you plan to assign or franchise the premises later, ensure the lease does not restrict this.

2. How Much Rent Do I Need to Pay?

The cost of rent is a major factor for any service provider. As a physiotherapist, finding a suitable space that offers privacy and sufficient room can be challenging. Once you identify a suitable site, understand the rent you must pay. Rent rarely stays the same throughout the lease, and landlords typically increase it in one of three ways:

1. Fixed Rate Increase: Rent increases by a fixed amount or percentage each year. For instance, if the rent starts at $20,000 and has a 25% increase, it will be $25,000 in the second year.
2. Market Review: Rent is adjusted to match current market rates, often at the start of an option term. If there is a disagreement over market rent, the lease may appoint a property valuer or agent to determine the rate.
3. Consumer Price Index (CPI) Review: Rent increases in line with CPI, which measures inflation and typically applies annually.

These terms are usually negotiated early, so it is crucial to consult a leasing lawyer once you receive an offer to lease. A lawyer may even be able to negotiate a rent-free period for your clinic.

3. Options for Renewal

Commercial leases specify an expiry date. As a health professional, many of your patients may be local to your clinic. To avoid losing patients due to relocation, ensure the lease contains a right or option to renew. Your lawyer can advise on any formal requirements for exercising this option.

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4. Parking 

Consider parking arrangements for both staff and patients. Negotiate exclusive spaces if possible. If you secure parking, the landlord may include a licence in the lease specifying use, insurance, and your responsibility for the area. Make sure the licence accurately reflects the agreed number and location of spaces.

Key Takeaways

Entering a commercial lease is a significant step when opening a physiotherapy clinic. Ensuring the lease aligns with your business needs and protects your interests is essential. Carefully review the permitted use, rent structure, renewal options, and parking provisions to avoid unexpected issues. Engaging a leasing lawyer early can help secure favourable terms, minimise risks, and support the long-term success of your clinic.

If you need help understanding the right lease for your physiotherapy clinic, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 1300 544 755 or visit our membership page. 

Frequently Asked Questions