Lease Negotiations

Cirrus Tenant Lease Services has been negotiating leases for health care professionals across North America since 1994. We are the recognized leader in the industry and successfully negotiate hundreds of professional leases each year. At Cirrus we understand the specific needs health care practitioners have and the challenges that they face. We have developed negotiation strategies and processes designed to ensure that those needs are met and challenges overcome. Our negotiators work to give the practitioner the maximum amount of flexibility with minimum liability.

Whether you operate a medical or dental clinic, Cirrus has developed a unique and results-oriented process that ensures your business is set up correctly, guaranteeing minimal risk to you, the practitioner, while maximizing the flexibility and future choices of the practice.

Over the years, and after having reviewed over 10,000 health care clinic leases from all over Canada and the United States, Cirrus has found that landlords have enjoyed profits far beyond what would be a “market” lease because of the lack or awareness and understanding of doctors and dentists on how to properly structure their practices' tenant lease. Landlords over the years have become very good at creating lease documentation that not only allows them to earn significant dollars through rental payments, but also by building “leverage” in the documentation, and “enforcing” the lease and its specific terms and conditions throughout the Term of the lease.

Depending on the type of practice as well as the short and long term goals of the practitioner, Cirrus has found that the following components of leases have traditionally provided landlords with maximum “leverage,” thus increasing the risk level while decreasing the flexibility of tenants throughout North America:

Tenant Construct: Over 75% of health care leases are not set up with the proper tenant construct. Overwhelmingly, landlords have convinced doctors and dentists in the past that they should be signing leases under their personal names, thus leaving the landlords with the maximum in guarantees of the covenants of the lease. Do landlords ever sign leases under their personal names? Of course not - they know better. Depending upon the size and type of clinic you operate, there is almost always a more suitable and protective way of signing a lease.                                                                                                                  

Assignment Provision: Unfortunately, most landlords know that whether your clinic is a medical or a dental office, the likelihood of you eventually assigning (transferring) your lease to another practitioner is high. Dentists are lucky enough to be able to actually sell their practices – and the assignment provisions in the lease dictate how easy or difficult that will be. When physicians retire, their practices are typically assigned to a younger physician who is brought in to carry on the practice. In either case, not setting up this ‘transition' properly in advance of this transfer occurring means the potential for a more difficult and/or costly process. Set up properly at the start of a lease, these difficulties can almost always be avoided or prevented.                                                                                                                 

Options to Extend (Renew): This is one of the most misunderstood components of any commercial lease. Set up properly, these Options can provide the basis for growth and continued long term business success of any type of clinic. So long as Options to Extend are backed up by a fair and reasonable lease document, they should be used to continue and extend the tenancy in that particular location. But because exercising Options means that no changes will be permitted to the document after the letter has been submitted to the landlord, one must ensure that the document does not continue to put the clinic and practitioner at risk for a further period of time. If it is determined that the document does contain significant risk (which is often the case…), the Options should not be exercised, but rather, the clinic should renegotiate some of those risks out of the document, while providing for flexibilities to be added (i.e. Death & Disability Clause).

What is the Best Strategy for Eliminating These Risks
At the End of Term…?

Once the risks are identified in your clinics' lease document, the best way to ensure that changes can and will be accepted by the landlord depends on your understanding of the “Tenant Lease Cycle.” By starting the renewal process 12 – 14 months prior to your expiry date, you are greatly reducing the landlords ‘leverage' to demand renewal terms that in many cases are unfair and not reflective of the market around you.

Landlords know that if they can avoid entering into renewal discussions with you until you are within the last couple of months of the Term, they will guarantee a much better deal for themselves. The simple way to counter this well known landlord strategy is to (i) know when your lease expires, (ii) identify the risks contained in your current documentation, (iii) establish your practice's short and long term goals, (iv) understand the market, (v) and then commence discussions with your landlord. By following this process, and starting it well enough ahead of time, you are guaranteed to be in a much better position to negotiate – and get valuable changes.