The largest expense for a dental practice, besides employees and staffing, is routinely the cost associated with the office real estate. That's true whether you lease or own the office space. This series focuses on the common traps and negotiating points in offices leases that most dental practices fail to consider when negotiating their lease. In this column, Matt LaMaster discusses repair and maintenance obligations found in traditional commercial leases and who is responsible for them.
Matt LaMaster, Esq., is the founder and principal attorney of the LaMaster Law Firm.The repair and maintenance of a dental office building is an unescapable undertaking, whether you own the real estate or lease the office space. If those repairs and maintenance are not properly taken care of, it can have a drastic impact on a practice's ability to operate and attract patients. Yet, many tenants are often surprised to learn just how much of the repair and maintenance obligation they have agreed to undertake in their lease agreement.
Imagine you open your dental practice with new equipment in a brand-new building with a great parking lot, beautiful shared entry hallway, and new furnishings inside. Now imagine a few years later the parking lot has potholes, the carpet is dirty, the tile is grimy, the landscaping is overgrown, the air conditioning hardly keeps the office cool, and the shared entry hallway has a whole in the wall.
The question you're probably asking yourself is "Who is going to make the necessary repairs?" or "Who should have maintained the space and made those repairs?"
This is a frequent scenario for dental practices in my experience. It comes down to the repair and maintenance obligations of the lease agreement between the tenant and landlord.
When you look at who is responsible for maintenance and repairs, think about it as two distinct pillars:
- Who is responsible for performing the work?
- Who is responsible for paying the expense?
That distinction may seem obvious now, but it is not so clear for many first-time tenants. Unfortunately, many landlords don't understand the distinction either. Additionally, some leases are so poorly written that they do not clearly define the two responsibilities. But these are separate items and they are different, so it's important that your lease reflect the responsibilities correctly.
Responsibility
Now to answer the question regarding who maintains the responsibility. That answer usually depends on what type of lease you have, a "net" lease or a "gross" lease. As mentioned in part 2 of this series, in a "net" lease, the payment obligations for repair and maintenance of the common areas are generally shifted to the tenant in the form of additional rent or common area maintenance charges. The common area maintenance is also generally performed by the landlord.
However, in most leases, net or gross, the repair and maintenance of the leased space itself remains with the tenant. Remember, the common area is different than the leased space, and that should be clearly defined in the lease. The repair or maintenance inside the leased space may be performed by the landlord and then subsequently charged to the tenant outside of the regular base rent. Some landlords even require that repairs and maintenance be done by them, mostly so that they can ensure that it is performed adequately. But, that performance by the landlord does not mean that the landlord has to pay for it.
If your lease provides that the tenant must provide maintenance and repairs inside the lease space, you need to take that responsibility seriously and budget for it. Make sure that you maintain the floors, the lights, clean the windows (if necessary), clear the plumbing, paint the walls, and so forth.
At the end of your lease, you may even be able to request an allowance for some of the expenses if you extend your lease. It's not uncommon for a landlord to pay for new carpet or paint after a five- to 10-year lease, if the tenant signs an extension.
To prevent surprise expenses and to have a complete understanding of the maintenance and repair obligations -- and the financial burdens they entail -- the maintenance and repair sections of a lease must be carefully reviewed in conjunction with the lease provisions dealing with operating charges.
Many leases are not clear on these two distinct responsibilities and are often a source for litigation or, at the least, create stressed landlord-tenant relationships. As a tenant, make sure that you understand what your responsibility is for maintenance and repairs. Remember, always ask yourself "Who performs?" and "Who pays?" If you have questions, ask an attorney.
Matt LaMaster, Esq., is the founder and principal attorney of the LaMaster Law Firm, which is committed to delivering legal services to dental professionals and their practices. For more information about dental-specific legal services, visit www.lamasterlaw.com.
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