Health Law Advisor

In our ongoing series of blog posts, we have examined key negotiating points for tenants in triple net health care leases. We also have offered suggestions for certain lease provisions designed to protect tenants from overreaching and unfair expenses, overly burdensome obligations, and ambiguous terms with respect to the rights and responsibilities of the parties. These suggestions are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. In our previous blog posts, we considered the importance of negotiating initial terms and renewal terms, operating expense provisions, assignment and subletting terms, maintenance and repair obligations, holdover provisions and surrender terms, tenant improvement allowances, exclusivity, expansion and relocation provisions, and default provisions. This final blog post in our series focuses on negotiating the letter of intent.  

While a letter of intent (“LOI”) is usually non-binding, it is an extremely important part of the lease process and a valuable tool to make expectations clear and prevent time consuming and costly back and forth during lease negotiations. The topics covered in our earlier blog posts in this series should be addressed in the LOI, which should serve as a road map for the parties and counsel in drafting and negotiating the lease. By agreeing on these basic terms up front, the parties will significantly reduce the amount of back and forth needed to arrive at a lease both parties find acceptable.

In our ongoing series of blog posts, we have examined key negotiating points for tenants in triple net health care leases.

We have also offered suggestions for certain lease provisions designed to protect tenants from overreaching and unfair expenses, overly burdensome obligations, and ambiguous terms with respect to the rights and responsibilities of the parties. These suggestions are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. In our previous blog posts, we considered the importance of negotiating initial ...

In our ongoing series of blog posts, we have examined key negotiating points for tenants in triple net health care leases. We also have offered suggestions for certain lease provisions designed to protect tenants from overreaching and unfair expenses, overly burdensome obligations, and ambiguous terms with respect to the rights and responsibilities of the parties. These suggestions are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. In our previous blog posts, we considered the importance of negotiating initial terms and renewal terms, operating expense provisions, assignment and subletting terms, maintenance and repair obligations, holdover provisions and surrender terms, and tenant improvement allowances. This latest blog post focuses on negotiating lease terms governing exclusivity, expansion and relocation.  A tenant should carefully negotiate these terms in order to protect its interest in the leased premises during the term.

Exclusivity provisions protect a tenant’s interest in leased premises by restricting landlords from leasing space in the same building or shopping center as tenant’s space for a similar permitted use. These provisions are not only important for retail tenants but should be negotiated for by healthcare tenants as well. For example, a tenant that operates a dermatology practice in a shopping center may want to restrict landlord form leasing space to other tenants who provide many of the same services. It is also important to define what tenant’s recourse is if landlord breaches the exclusivity or if another tenant operates outside of its permitted use in violation of the exclusivity provision. This may include a reduction in rent for a certain period of time while landlord attempts to resolve the violation, and eventually a termination right if landlord is unable to cause the rogue tenant to cease the violation.

Expansion provisions allow tenants the flexibility to expand into additional space that may become available for lease by landlord during the lease term, usually contiguous space or other space in the same building. Tenants should push for a right of first offer if such space should become available, even if the tenant is uncertain of what its future needs may be during the term.  Negotiated rent and coterminous terms should be included in the lease.

In our ongoing series of blog posts, we examined key negotiating points for tenants in triple net health care leases. We also offered suggestions for certain lease provisions that will protect tenants from overreaching and unfair expenses, overly burdensome obligations, and ambiguous terms with respect to the rights and responsibilities of the parties. These suggestions, when implemented, are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. In our previous blog posts, we considered the importance of negotiating initial terms and renewal terms, operating expense provisions, assignment and subletting terms, maintenance and repair obligations, and holdover provisions. This latest blog post focuses on negotiating surrender terms. Tenants should understand and negotiate their obligations for removal of alterations, equipment and other personal property, and the condition in which leased premises must be surrendered at the expiration or earlier termination of the lease term. Failure to do so could result in delays in a tenant’s ability to vacate the leases premises as well as unforeseen significant costs.

Most commercial leases provide that alterations and improvements made by or on behalf of a tenant become the property of landlord and must be surrendered with the leased premises upon expiration or earlier termination of the lease unless landlord requires removal. We suggest tenants request language in the lease requiring landlord to advise at the time it consents to such alterations and improvements whether or not the same must be removed, rather than landlord having the right pursuant to the terms of the lease to demand removal at the time of expiration or earlier termination. Having such a term in place eliminates the element of surprise and provides tenant with certainty as to which alterations and improvements tenant is required to remove. Tenants may also want to limit the removal requirement so that any alterations or improvements that cannot be removed without significant damage are to remain in the leased premises upon expiration of the lease term.

In our ongoing series of blog posts, we have examined key negotiating points for tenants in triple net health care leases. We also have offered suggestions for certain lease provisions that will protect tenants from overreaching and unfair expenses, overly burdensome obligations, and ambiguous terms with respect to the rights and responsibilities of the parties. These suggestions are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. In our previous posts, we considered the importance of negotiating initial terms and renewal terms, operating expense provisions, assignment and subletting terms, and maintenance and repair obligations. This latest post focuses on negotiating holdover provisions. Holdover provisions should be carefully negotiated in order to limit a tenant’s liability for expenses arising from unforeseen circumstances.

What happens if a tenant does not vacate on lease expiration without having negotiated a renewal or a new lease? Circumstances may arise which interfere with a tenant’s ability to vacate premises in a timely manner, such as delays in new space being ready for occupancy or delayed or terminated negotiations with respect to a lease for intended new space.

In our ongoing series of blog posts, we have been examining several key negotiating points for tenants in triple net health care leases. We also have offered suggestions for certain lease provisions that will protect tenants from overreaching and unfair expenses, overly burdensome obligations, and ambiguous terms with respect to the rights and responsibilities of the parties. These suggestions are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. In our previous blog posts, we considered the importance of negotiating ...

In our upcoming series of blog posts, we will look at several key negotiating points for tenants in triple net healthcare leases. We will also offer suggestions for certain lease provisions that will protect tenants from overreaching and unfair expenses, overly burdensome obligations, and ambiguous terms with respect to the rights and responsibilities of the parties. These suggestions are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. The first blog post in our series focuses on negotiation of initial terms and ...

On April 18, 2017, the U.S. District Court for the Middle District of Florida adopted a magistrate judge's recommendation to grant summary judgment in favor of defendant BayCare Health System ("BayCare") in a False Claims Act whistleblower suit that focused on physician lease agreements in a hospital-owned medical office building, thereby dismissing the whistleblower's suit.

The whistleblower, a local real-estate appraiser, alleged that BayCare improperly induced Medicare referrals in violation of the federal Anti-Kickback Statute and the Stark Law because the lease agreements with its physician tenants included free use of the hospital parking garage and free valet parking for the physician tenants and their patients, as well as certain benefits related to the tax-exempt classification of the building. The brief ruling affirms the magistrate judge's determination that the whistleblower failed to present sufficient evidence to establish either the existence of an improper financial relationship under the Stark Law or the requisite remuneration intended to induce referrals under the Anti-Kickback Statute.

The alleged violation under both the Anti-Kickback Statute and the Stark Law centered on the whistleblower's argument that the lease agreements conferred a financial benefit on physician tenants – primarily, because they were not required to reimburse BayCare for garage or valet parking that was available to the tenants, their staff and their patients.  However, the whistleblower presented no evidence to show that the parking was provided for free or based on the physician tenants' referrals.  To the contrary, BayCare presented evidence stating that the garage parking benefits (and their related costs) were factored into the leases and corresponding rental payments for each tenant.  Further, BayCare presented evidence to support that the valet services were not provided to, or used by, the physician tenants or their staff, but were offered only to patients and visitors to "protect their health and safety."

In light of the evidence presented by BayCare, and the failure of the whistleblower to present any evidence that contradicted or otherwise undermined BayCare's position, the magistrate judge found that: (i) no direct or indirect compensation arrangement existed between BayCare and the physician tenants that would implicate the Stark Law, and (ii) BayCare did not intend for the parking benefits to induce the physician tenants' referrals in violation of the Anti-Kickback Statute.

My earlier post explored various real estate strategies frequently used in hospital M&A transactions.  Each of those different approaches – using real estate assets to secure acquisition financing, increasing existing lines of credit, or monetizing the real estate assets through divestiture – reflect different objectives and opportunities.  But, real estate is more than "location, location, location" and "strategy, strategy, strategy"—there must also be "value, value, value".  The real estate market itself is the lynchpin to establishing the value of individual ...

You frequently hear the phrase "location, location, location" be used to describe the value of real estate.  True, location matters tremendously, no matter the type of real estate.  But, in hospital M&A transactions, the value of the real estate assets is often derived from "strategy, strategy, strategy".  Today, the real estate assets of hospitals are playing an increasingly important role in hospital M&A transactions.  This trend is caused in part by the desire of purchasers to support purchase prices or other financial impact of the transaction with "hard" physical assets, given ...