Healthcare Professionals: Negotiate Your Commercial Lease

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By Dale Willerton and Jeff Grandfield

For many healthcare professionals, negotiating a good lease or lease renewal against an experienced landlord or their agent can be a challenge. While a healthcare professional focuses on proper patient care, savvy real estate agents and brokers are specialized sales people. Their job is to sell tenants on leasing their location at the highest possible rental rate. 

Professional healthcare tenants may go through the leasing process two or three times in their entire lifetime – yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating both the Offer to Lease and the Formal Lease Agreement is vital for a healthcare professional as the amount of rent he/she pays will directly affect the practice’s financial bottom line.

Whether you are leasing a new location for the first time for your practice or negotiating a lease renewal, these are some tips for tenants: 

Negotiate to Win: All too frequently, tenants enter into lease negotiations unprepared and don`t even try winning the negotiations. If you are not even negotiating to win, you won`t. With big commissions at stake, you can be sure the landlord`s agent, on the other hand, is negotiating fiercely to win. Healthcare professional tenants should remember that it is okay to negotiate assertively. 

Be Prepared to Walk Away: Try to set aside your emotions and make objective decisions. Whoever most needs to make a lease deal will give up the most concessions. A good practice in a poor location will become a poor business. 

Ask the Right Questions: Gathering information about what other tenants are paying for rent or what incentives they received will position you to get a better deal. The landlord and his agent know what every other tenant in the property is paying in rent, so you must do your homework too. 

Choosing Who Will Help You: Doctors will often turn to one of three professionals for help. Real estate agents and brokers typically work for the landlord who is paying their commission (even if splitting the commission). Lawyerswill focus on the legality of the lease agreement (which is not in question) and may not have any market real estate insight to get you a better deal. A Lease Consultant, like The Lease Coach, will negotiate for the best lease terms and handle the lease documents as well. 

Never Accept the First Offer: Even if the first offer seems reasonable, or you have no idea of what to negotiate for, never accept the leasing agent`s first offer. In the real estate industry, most things are negotiable and the landlord fully expects you to counter-offer. 

Ask for More Than You Want: If a tenant wants three months free rent, The Lease Coach will ask for five months. No one ever gets more than they ask for. Be prepared for the landlord to counter-offer and negotiate with you as well. Don`t be afraid of hearing `no` from the landlord – counter-offers are all part of the game. We often refer to doctors as “golden tenants” as they pay their rent on time and in full; however, they don’t often realize their own strength or their desirability as tenants. 

Negotiate the Deposit: Large deposits are not legally required in a real estate lease agreement for a tenant. Deposits are negotiable and, more so than anything else, often serve to compensate the landlord for the real estate commissions he will be paying out to the agents. If you are negotiating a lease renewal and your landlord is already holding a deposit of yours, negotiate to get that deposit back. The Lease Coach is frequently successful at negotiating for the tenant’s deposit returned with a lease renewal. 

Measure Your Space: Healthcare professional tenants frequently pay for phantom space. Most tenants are paying their rent per square foot, but often they are not receiving as much space as the lease agreement says. 

Negotiate, Negotiate: The leasing process is just that – a process, not an event. The more time you have to put the deal together and make counter-offers, the better the chance you have of getting what you really want. Too often, tenants mistakenly try to hammer out the deal in a two- or three-hour marathon session. It is more productive to negotiate in stages over time. 

Educate Yourself and Get Help: Unless you have money to throw away, it pays to educate yourself which is why we wrote the book, Negotiate Commercial Leases & Renewals For Dummies. And, don`t forget to have your lease documents professionally reviewed by a Lease Consultant before you sign them. With hundreds of thousands of dollars in rent at stake, personal guarantys and other risks, you can`t afford to gamble. In leasing, healthcare professional tenants don`t get what they deserve, they get what they negotiate. 

For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to [email protected]

Dale Willerton and Jeff Grandfield – The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Dale and Jeff are professional speakers and co-authors of Negotiating Commercial Leases & Renewals For Dummies (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail [email protected] or visit www.TheLeaseCoach.com