04-24-2015 | Health Law Blog

Practical Issues to Consider When Beginning or Changing a Clinic Facility Arrangement

By: Kelly Hamborg

I’m often contacted by clients seeking a new or changed office facility arrangement. These transactions are generally in the form of an outright purchase of property, or the lease of an existing building or space. While ownership and leasing each has their own set of issues, there are several primary points to consider if you are thinking about a change.

First and foremost, real estate transactions generally don’t move as fast as people would like. There are a variety of reasons for this, but the point is that a fair amount of lead time and advance planning is essential. It is therefore necessary to begin a search for new facilities well in advance of the desired move­in date. This is especially important when there are lease termination and extension deadlines in existence for the present facilities. While it is certainly possible for purchase and leasing transactions to move quickly, healthcare facilities involve unique interior configurations, often requiring a complete redesign. Unless the facility had previously been used as a similar health clinic facility, “turn-key” or “move­in” space is rare. Advance planning is therefore a must.

It is important to work with an attorney early in the process. Real estate brokers can provide guidance as to availability of properties and market rates and terms. Both purchase and leasing transactions, however, involve fairly complex documents, which should be carefully negotiated and understood. While many of the terms in such documents may seem fairly straight forward, an attorney will be able to point out potential areas of concern.

While every purchase and lease transaction is unique, the key point in either scenario is that you want to end up at closing with a facility that can be used or developed as a health facility office at the price point, time-frame and other terms you desire. If the preliminary indications are that a location will work, then the next step in a purchase transaction is the negotiation of a written purchase agreement. From a buyer’s perspective, it is desirable to get a property under contract as soon as possible, with the ability to terminate the agreement or to “walk away” if inspections or reviews reveal undesirable conditions. The same concept applies in a lease transaction; however, a more common approach is the use of a nonbinding letter of intent, which outlines the primary lease terms, but gives a prospective tenant the opportunity to begin preliminary inspections and reviews and the ability to walk away if desired. 

These are just a few points to consider if a different facility arrangement is contemplated. If you are considering such a change, call your BrownWinick attorney to ensure that the new facility can be delivered on the desired terms.