Sharing medical practice spaces is becoming very common. With medical practices increasingly becoming multi-disciplinary, large professionals with a range of expertise can occupy the space, such as doctors, dentists, physiotherapists and podiatrists.

As many health professionals may not have the capital or customer demand to rent premises on their own, the trend of sharing spaces has increased. This arrangement sees each party have set rooms and share administrative staff.

Sharing medical practice spaces has benefits for patients and practitioners alike. However, there are legal issues you should consider before leaping into such an arrangement. This article sets out your options and provides a good starting point for thinking about this kind of arrangement.

Options for Occupation

There are various options available if you want to share a medical space, and the best one will depend on your situation. Do you require your own allocated room? Do you want to share a room with others on a part-time roster? These are some of the questions you should consider.

Answer those questions, and you can begin exploring your options further.

Lease

You could enter into a lease for the premises with the other parties.

Under a lease, each party will have the same rights and obligations, including rights to use the entire premises.

This option makes sense for parties who have the same needs. For example, if two medical practitioners wish to occupy premises for the same period and have the same requirements for the premises, a lease would be a good choice.

Other legal issues also arise, including whether the practice should establish a separate business to manage the medical practice as a whole and handle the purchasing and ownership of assets. These assets include intellectual property. This decision is a complicated one, and you should seek legal advice about such an arrangement.

Sub-Lease

The owner or a lessee of the premises may grant another party a sub-lease, allowing them to occupy a certain space within the premises.

If the party wanting to grant a sub-lease is a lessee, it is important that they consider whether sub-leasing is permitted in their lease (the head lease) and whether the lessor’s consent will be required to sub-lease.

Ultimately, creating a sub-lease will allow the sub-lessee to have exclusive possession of a space within the premises for a specific period. The formal requirements of a sub-lease include:

  • the payment of rent;
  • exclusive possession;
  • the reversion of interest back to the lessee or owner; and
  • occupation of the premises for a certain period.

A sub-lease also usually provides the sublessee with more rights, for example, a right to quiet enjoyment of the leased premises.

If you’re considering sub-leasing in your sharing situation, you should consider:

  • is exclusive possession possible for the space or will other parties be able to use the space?
  • will this be a long-term sharing arrangement?
  • will the sub-lessee have sufficient demand for customers?

A sub-lease is one of the more formal arrangements for sharing a medical practice space and will require more formalities between the parties. For example, the sub-lessee may need to be open during the same times that the entire medical practice is open.

The lessee or owner of the space will also need to respect the sub-lessee’s occupation and will not have immediate access to the space due to the sub-lessee’s right to exclusivity.

Licence to Occupy

The main difference between a sub-lease and a licence to occupy is that a licence to occupy does not grant exclusive possession of the space.

The parties will need to have an intention to create a legal relationship, but the licence allows for informal arrangements. For example, different parties may have a licence to share the same space during different times.

A licence to occupy is a good option for parties who want a short-term arrangement. It would also be suitable in a situation where a licensee may not have sufficient demand to warrant exclusive possession of the space, and instead shares a room on a part-time basis with another party.

Co-Sharing Arrangement

A co-sharing arrangement is similar to a licence to occupy as it allows a party to use a space for a certain period without exclusive possession. However, while licences are commonly used for on-going arrangements, a co-sharing arrangement is usually used on a one-off basis.

A co-sharing arrangement can be compared to hiring a studio or office space for an hour or up to one day. This option may be ideal for medical professionals who require a space in a specific location on a one-off basis. This is the least formal of the sharing options, and would only be used in specific circumstances where the parties do not intend to have an ongoing relationship.

Important Terms to Include When Sharing Medical Practice Spaces

In addition to standard terms such as the duration of the arrangement and fees, sharing medical practice spaces gives rise to other important issues. A formal agreement should address these issues to protect the interests of both parties. When drafting the agreement, some important questions to consider include:

 

Topic Area Issues
Premises

How will the space be accessed and will there be a need to go through common areas?

Will the medical professional be required to show their qualifications?

Equipment

Will a party be able to use equipment within the space?

Will a medical professional be able to install or use their own equipment within the space?

Services Will other practice management services be provided? For example, mailing system, reception services, booking arrangements, nursing support and record keeping.
Fees

How will the medical professionals collect fees?

How much input will they have in the fee amount?

Insurance What insurances will be required by both parties?
Promotion To what extent will the medical professional be able to advertise their business within the medical practice?
Legal

Will the medical practitioner be able to use the intellectual property of the medical practice?

Do you need a restraint of trade to prevent professionals leaving and setting up a competing practice nearby?

 

Drafting a Services Agreement

If parties will share responsibility for practice management services, we recommend that, on top of a sublease or licence agreement, you also enter into a service agreement. A service agreement will regulate:

  • which practice management services will be provided;
  • costs of services;
  • access to services; and
  • obligations as to services.

Key Takeaways

Are you thinking about agreeing to share medical practice space? You need to consider the type of occupancy and terms, and ensure they reflect the needs of both parties. If you need assistance assessing your shared medical practice arrangement, contact LegalVision’s commercial leasing lawyers today on 1300 544 755 or fill out the form on this page.

Kristine Biason
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