Guide · Healthcare · Commercial Leasing

Commercial Lease Red-Flag Checklist for Healthcare Practices

A healthcare tenant signs a lease written for a generic retail store and then discovers, years later, that it cannot expand its X-ray room, cannot sell the practice without the landlord’s blessing, and is personally on the hook for the whole term. The red flags were all in the document. Here is what to look for before you sign.

By Lincoln Square Law · 10-minute read

A medical, dental, or behavioral-health practice asks more of its space than most tenants: power and plumbing for clinical equipment, privacy for patients, accessibility, after-hours access, and a term long enough to justify a build-out that can run into six figures. A standard commercial lease accounts for none of that, and the gaps do not announce themselves until they cost you. Run any lease through the flags below, and treat each one as a negotiation, because the day to fix a lease is the day before you sign it.

The use clause: does it actually permit your practice?

Start here, because everything else assumes it. The permitted-use clause must expressly allow your specific licensed practice, not “office use,” which a landlord can later argue excludes clinical services. If you provide a service that generates regulated waste, uses imaging equipment, or dispenses anything, the use clause should say so. A too-narrow use clause can also trap you: if it names your practice so specifically that you cannot sublease or assign to a different kind of tenant, you have limited your own exit.

Exclusivity: can a competitor move in next door?

Without an exclusivity provision, nothing stops the landlord from leasing the adjacent suite to a competing practice. For a practice that depends on a catchment area, an exclusive-use clause protecting your specialty within the building or center can be worth more than a rent concession. Ask for it. Landlords expect the request from sophisticated healthcare tenants.

Assignment and subletting: your practice-sale clause in disguise

The day you sell your practice or bring in a DSO or partner, this clause governs whether you can transfer the lease. A lease that bars assignment, or lets the landlord withhold consent for any reason, can hold your exit hostage or hand the landlord leverage over your sale. Negotiate consent that “shall not be unreasonably withheld,” and carve out transfers to an affiliated entity or a practice buyer so a routine transaction does not require begging.

Personal guarantees: how much of your own money is at risk?

Landlords often demand a personal guarantee, especially from a newer practice. A full-term personal guarantee puts your personal assets behind years of rent. Push instead for a limited or “burn-off” guarantee that shrinks or ends after you have shown a track record, or a cap measured in months rather than the life of the lease. This single term can be the difference between a manageable risk and a catastrophic one.

Build-out, tenant improvements, and who owns the work

Clinical build-outs are expensive, and the lease should be clear on the tenant-improvement allowance, who controls and pays for the work, and what happens to your improvements at the end of the term. Watch for a clause requiring you to restore the space to its original condition, which can force you to pay to demolish the very build-out you paid to install. A long enough term to amortize the investment is part of this same calculation.

Operating expenses and CAM: the rent behind the rent

In a net lease, your obligation is base rent plus a share of operating expenses and common-area maintenance, and those pass-throughs can climb. Look for a cap on controllable expenses, the right to review the landlord’s reconciliation, and clear exclusions so you are not funding the landlord’s capital improvements. Vague CAM language is where budgeted rent quietly becomes something larger.

HVAC, power, and after-hours access

Clinical space has real infrastructure needs. Confirm who is responsible for the HVAC system and its repair or replacement, whether the electrical capacity supports your equipment, and whether you have the after-hours access and climate control a practice requires. A clause making you responsible for replacing an aging rooftop unit can turn into a five-figure surprise.

Compliance, accessibility, and code

The lease should allocate responsibility for bringing the space into compliance with accessibility and building codes for medical use. Do not assume the landlord delivers a compliant, permit-ready clinical space. If the allocation is silent, the cost of code and accessibility work can land on you.

Signage, relocation, and holdover

Three smaller clauses carry outsized risk. Confirm you have the signage rights a patient-facing practice needs. Reject or tightly limit any landlord right to relocate you to another suite, which for a healthcare practice means re-permitting and rebuilding. And check the holdover provision, which can spike your rent to well above the base rate if you stay past the term while finishing a transition or a move.

How to use this checklist

You do not need to win every point. You need to know which flags are dealbreakers for your practice and which are trade-offs. The use clause, assignment rights, and personal guarantee usually deserve the hardest negotiation, because they govern whether you can operate, sell, and limit your downside. We review healthcare leases against this list before signing, mark the terms that will matter at the practice’s most important moments, an expansion, a sale, an equipment failure, and negotiate them while you still have leverage, which is to say before your name is on the last page.

The lender behind your landlord: SNDA

Your landlord almost certainly has a mortgage, which means a lender sits behind your lease whether you see it or not. If that lender ever forecloses, your lease can be extinguished unless you have a subordination, non-disturbance, and attornment agreement, an SNDA. The “non-disturbance” piece is the one that protects you: it commits the lender to honor your lease and leave you in possession even if it takes over the property. For a healthcare tenant that has sunk six figures into a build-out, an SNDA is not a technicality. It is the difference between a secure location and one that can vanish in a foreclosure you had no part in. Ask for it at signing, because it is far harder to obtain later.

Insurance, indemnity, and the waiver you want

Leases allocate risk through insurance and indemnity clauses, and a one-sided version can quietly make you responsible for the landlord’s exposure. Read what coverage you are required to carry and confirm it is achievable and sensible for a clinical practice, not boilerplate written for a warehouse. Watch the indemnity language: a broad clause can obligate you to cover the landlord for claims that were not your fault. And look for a mutual waiver of subrogation, which stops each party’s insurer from chasing the other after a covered loss, a quietly valuable protection that keeps an insured fire or water event from turning into litigation between you and your landlord. These clauses rarely get read, which is exactly why they are worth reading.

A short worked example

Consider a growing practice that signs a seven-year lease to secure a good location, accepts the landlord’s standard form to keep the deal moving, and gives a full personal guarantee to get the space. Three years in, the dentist wants to bring on a partner and eventually sell. The assignment clause lets the landlord withhold consent at will, so the sale stalls. The use clause names the practice so narrowly that subletting to anyone else is impossible. The personal guarantee still covers four more years of rent, so walking away means personal exposure. None of this was hidden. All of it was negotiable at signing and immovable afterward. The same practice, with an assignment standard of reasonable consent, a use clause broad enough to permit a transfer, and a burn-off guarantee, would have kept every option it later needed. The lease is signed once and lived in for years. The hour spent negotiating it is the cheapest hour in the whole tenancy.

Co-tenancy and the center around you

If your practice sits in a shopping center or medical building, the health of the property affects your practice, and a few clauses address it. A co-tenancy provision can give you rent relief or an exit if an anchor tenant leaves and foot traffic collapses, valuable for a practice that depends on visibility. Watch, too, for a landlord’s right to change the center: to redevelop, to relocate common areas, or to lease adjacent space to a use that conflicts with a healthcare setting. You cannot control the property, but you can negotiate protections against the changes most likely to hurt you, and you can insist that any use restrictions you were promised are actually enforceable against future tenants. The goal is not to predict every future. It is to keep the events most damaging to a clinical practice from happening to you without recourse.

Where counsel earns its fee

You do not need a lawyer to read a lease, but you do need one to know which of these flags is a genuine dealbreaker for your practice and which is a negotiating chip you can trade. The value is not in redlining every clause. It is in recognizing that the assignment provision is really your practice-sale clause, that the personal guarantee is your personal-asset exposure, and that the use clause decides whether you can legally operate at all, and in fixing those before your signature makes them permanent. We review healthcare leases against this checklist, mark the handful of terms that will matter at the practice’s most important moments, and negotiate them while you still hold the leverage that disappears the day the lease is signed.