Are you opening a new physiotherapy clinic? If so, it is likely that you will enter a commercial lease. A commercial lease is an agreement that provides you with exclusive control over a premises for a certain purpose and period of time. Often, the lease is signed or negotiated as an afterthought, however as a health professional, it is important to ensure that the lease meets all of the needs of your clinic. Signing a lease with harsh or inappropriate terms can have serious financial consequences for your business. Often an agent or a landlord will arrange for you to sign a heads of agreement which then dictates the lease terms. To ensure that your lease works in your favour, you should speak to a leasing lawyer before entering into any agreement.
There are three key questions that any physiotherapist should ask before entering into a commercial lease:
1. What does the lease permit me to do?
All commercial leases will specify exactly what your clinic will be allowed to do on the premises. Under the lease, you will be provided possession of the premises subject to you using it for this purpose. For example, if the permitted use of a property is to sell clothing from a store, you will not be allowed to operate a physiotherapy clinic from the premises. You should make sure that the lease clearly specifies provision of health services including physiotherapy, rehabilitation and diagnosis as the permitted use for the premises. Consider the future of your business and whether you may expand to offer additional services such as massage, acupuncture etc. A well drafted “permitted use” clause will allow you to operate your business without any restrictions.
2. How much rent do I need to pay?
A key consideration for any professional service provider is the cost of rent. As a physiotherapist, it may be difficult to find a site that meets all of your requirements in terms of space and privacy. But when you do, you should make sure that you fully understand how much rent you will need to pay. It is rare for the rent of a commercial to remain the same throughout the whole lease. There are three common ways in which a landlord may seek to increase rent in the lease:
- A fixed rate increase is where rent will increase at a fixed rate or percentage usually on an annual basis. For example a 25% increase will mean that if the rent for your physiotherapy clinic is $20,000 for your first year then it will be $25,000 in your second year and so on.
- A market review is where the rent will be increased based on the current market rent for your premises. It is common that this mechanism is applied for the first year of an option term of the lease (if any). If the parties cannot agree on what the market rent is, then usually the lease will specify a person, such as a property valuer or real estate agent, who will review the current market rent and value of similar properties to determine what your rent should be.
- A Consumer Price Index (‘CPI’) rent review is based on an evaluation of CPI. A CPI review evaluates the inflation in the price of goods and services and usually takes place on a yearly basis.
These terms are usually decided during the initial stages of negotiations so it is important to contact a leasing lawyer as soon as you are provided with an offer to lease. We may even be able to negotiate a rent-free period for your clinic!
3. Options for renewal
All commercial leases prescribe a date for expiry. As a health care professional, it is likely that a number of your patients will come from the area where you operate your clinic. It is important to ensure that your lease contains a right or option for you to renew your lease upon expiry so you do not lose all of your patients if you are required to relocate your practice.
Your leasing lawyer will let you know any formal requirements for exercising an option to renew.
Are you about to start a physiotherapy clinic? It is important that you engage a specialist leasing lawyer to advise you on the lease terms, offer document and lease. Our leasing lawyers have extensive experience in helping clients in the health industry with their commercial leases. Contact LegalVision on 1300 544 755 for a no obligation fixed-fee quote.