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Negotiating Medical & Dental Leases

  • healthcarerealtyse
  • 7 days ago
  • 3 min read



By Frank Ricci

Principal, Healthcare Realty & Development Services, LLC

Originally Published: May 2018 in Orlando Medical News


Leasing medical or dental office space is one of the most important financial decisions a healthcare provider will make. With lease terms often stretching from 3 to 10 years, it’s crucial to negotiate the right terms—not just the rent, but the structure, flexibility, and financial advantages embedded in the document.


Here’s a practical guide to help you navigate the lease negotiation process like a pro—and avoid costly mistakes.


1. Understand and Maximize Your Useable Space

Office rent is typically quoted in dollars per square foot per year ($/SF/YR), but the type of square footage used can make a big difference in your total cost.


Key Definitions:

  • Useable Area (USF) – The actual space within your four walls

  • Rentable Area (RSF) – USF + a pro-rata share of shared/common areas (typically adds 15%)

  • Gross Area (GSF) – May include all common areas, plus elevators, overhangs, and lobbies (can add 18–20%)

Example:

If you need 5,000 sf of usable space, here’s how much space you may end up leasing:

  • USF = 5,000 sf

  • RSF = 5,750 sf

  • GSF = 6,000 sf

That’s up to a 20% difference in cost. Always ask how square footage is calculated and negotiate based on useable space whenever possible.


2. Ask for Free Rent and/or Tenant Improvement Allowances

Most landlords are willing to offer incentives to secure long-term tenants. Two of the most valuable ones include:

  • Free Rent: Typically 1–3 months, depending on market vacancy

  • Tenant Improvement (TI) Allowance: Can range from $15/sf (cosmetic updates) to $75–$100+/sf (complete buildouts)

Your broker should help you negotiate the best combination of rent, term, and TI, based on the building’s condition and your office needs.


3. Secure the Greatest Tax Advantages

This often-overlooked area can have massive long-term financial implications. Your lease should specify how tax deductions and depreciation are handled—especially if you’re investing in buildouts.

To maximize benefits:

  • Include a Cost Segregation Study as a lease amendment

  • Clearly define ownership of improvements and depreciation rights

  • Ensure your tax advisor is involved in the early stages


4. Clarify All Cost Responsibilities in the Lease

A professionally negotiated lease will detail who pays for what. Address the following:

  • Base rent & annual increases

  • Common area maintenance (CAM) fees

  • Utilities and after-hours charges

  • Management, legal, and administrative fees

  • Property taxes, assessments, and dispute costs

  • Insurance (property, liability, flood, etc.)

  • Major system repairs: HVAC, roof, elevators

Get these terms in writing, and ensure your lease doesn’t expose you to unexpected future costs.


5. Protect Flexibility and Practice Growth

Your lease should support your practice—not box it in. Be sure to address:

  • Length of lease and options to renew

  • Expansion rights or “Right of First Refusal” on adjacent space

  • Exclusivity clauses to limit competition in the building

  • Relocation clauses (try to eliminate or tightly define this)

  • Use restrictions, especially in hospital-owned properties

  • Hours of operation and utility charges for nights/weekends

  • Force majeure & condemnation clauses (e.g., road expansions)

Even if they seem minor now, these clauses can seriously affect your practice operations later on.


6. Negotiate Site-Wide Privileges & Other Terms

While your lease controls what happens inside your space, you’ll still be affected by what happens outside of it. Address these in advance:

  • Parking assignments

  • Exterior signage rights

  • Building accessibility and ADA compliance

  • Rights to install specialty equipment

  • Option to purchase the building or your space in the future

These items often get overlooked but can make or break your long-term satisfaction with the location.


Final Thoughts: Always Use a Professional Team

A medical or dental office lease is a complex legal and financial agreement. The best way to protect yourself is to use two experts:

  1. A healthcare real estate broker who knows the market and can negotiate favorable terms

  2. A real estate attorney to review the final document for legal and tax implications

Your broker should prepare a detailed Letter of Intent (LOI) outlining all deal points to eliminate surprises. The LOI becomes your roadmap to an enforceable lease—with fewer legal fees and a smoother closing process.


About the Author

Frank Ricci is a licensed real estate broker and building contractor based in Winter Park, Florida. As principal of Healthcare Realty & Development Services, LLC, he has helped hundreds of medical and dental practices negotiate successful lease agreements and develop high-performance spaces.


Need Help With Lease Negotiation?

If you're preparing to lease space or renew your current agreement, let’s talk. Our healthcare-specific experience ensures you don’t leave money—or flexibility—on the table.

📞 Call Frank at 407-947-5074 📩 Or Contact Us Online

 
 
 

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