Medical Office Leases in BC – What Tenants Should Watch Out For

Many of our clients are doctors looking to renew or establish a new medical office lease with a landlord.

Often times, a doctor may rent a space from a commercial building that does not deal exclusively with the medical industry, and the lease offered by the landlord may not be suitable for a medical office.

Here are some common issues to watch for, which we can assist with identifying and rectifying:

• Patient Confidentiality

It’s industry-standard to see the landlord seeking a right for the landlord to enter the leased premises either at any time or with notice – this is usually for the purposes of doing maintenance or conducting inspections. However, a tenant doctor has the obligation to protect the privacy of their patients, including their medical records, charts, and samples.

This can be remedied by modifying the right so that a landlord cannot enter the space where physical copies of patient records or other confidential materials are stored, or alternatively that they can only do so when accompanied by a member of the doctor’s clinic. This allows both parties to carry on their business, while minimizing the risk to the doctor as tenant.

• Permitted Uses

A standard-form commercial lease prepared by a landlord or their leasing representative will often include language prohibiting tenants from engaging in certain businesses that the landlord sees as ‘higher risk’. This commonly includes passport offices, government offices, marijuana stores, auction houses, bankruptcy sale stores – as well as medical and dental offices.

Leasing agents from the landlord’s office may not always remember to modify the standard-form language that they are accustomed to, and in doing so may cause a tenant doctor to enter into an agreement which still requires the doctor pay rent for the lease, while also having their business as a medical office strictly prohibited under the terms of said lease.

• Medical Equipment

A landlord, looking to protect their interior, may often include language that prohibits the tenant from adding any ‘fixtures’ to the property. Generally-speaking, a fixture is anything that is firmly attached to the leased premises and not easily moved. Other times, a landlord may prevent specific types of fixtures, such as light fixtures.

The issue this presents for doctors is that depending on the type of practice, fixtures may often be required – examination tables, lights on swivel arms that are bolted to the wall or floor, eyewash or handwash stations, etc.

Language may also be included that any fixtures added require the consent of the landlord, or that upon terminating the lease and leaving the premises, that the tenant gives up all ownership of the fixtures to the landlord. If this includes medical equipment, it can be quite an expensive mistake to make for the tenant doctor.

• Granting a Security Interest

Typically, a lease will contain a language whereby the tenant has to agree to give the landlord a security interest in everything the tenant brings to the premises, including trade fixtures. Usually this would be office furniture, computers, and typical office fare.

However, for a tenant doctor who does not own the medical equipment they are using, and are instead leasing equipment, that doctor is not the owner of the equipment, and therefore does not have the authority to grant a security interest in those items – even though the lease requires it. Additionally, the equipment leasing agreement may have other obligations that are triggered by a third-party (such as the landlord) seeking to obtain a security interest in the leased equipment.

• Medical Waste Disposal and Utilities

As a doctor, depending on one’s practice, a tenant doctor may have unique waste disposal needs that need addressing in the medical office lease. Worse yet, the landlord’s lease may have general default terms surrounding hazardous waste that the tenant doctor can’t comply with. A lawyer can help with preparing language surrounding a private contractor for disposal of needles, medicines, or other waste that may not be adequately addressed by the standard terms that the landlord uses.

Similarly, a doctor’s practice may require certain features to be provided by the landlord, especially with respect to electricity. A doctor operating a cosmetic beauty practice would certainly not want the power to go out during a procedure, and a general practitioner who is storing temperature-sensitive vaccines would not want a cut to the electricity powering refrigeration and storage to catch them by surprise. Language regarding representations for supply of electricity, indemnity for power failure, or assurances of the premises having a backup generator should be included in the lease.

These are just some of the many issues that can come up in obtaining a lease for a medical office in a commercial space. A lawyer can assist you in reducing your risk when entering a long-term commercial lease agreement.

If you are entering a lease for a medical office or other professional, industry-specific space, contact Jaden Lau at Bell Alliance. We would be more than happy to help with navigating your next commercial lease.