We’ve all heard this bedtime story: the one about the veterinarian who after years of schooling and associating decided to start their own practice.

Vet with a Black and White CatEager to get their practice underway, they go through the necessary steps to select a location, secure financing, and happily sign off on a ten year office lease provided by their landlord. However; they miss the most critical and important stage that ensures a healthy and successful veterinary business — reviewing the details of the office lease.

The fairytale starts to go south when our doctor realizes that the office lease they were so eager to sign initially is now impeding the growth and security of their clinic. They find themselves buried in clauses and contractual obligations that hinder their ability to practice alternative forms of veterinary care, bring in associates, expand the practice, or eventually sell it.

Having incurred significant financial loss due to unreasonable rent escalations, a forced practice relocation (at the doctor’s expense), and a decline in business, our vet is forced to try and sell the clinic and return to associating.

The moral of the story? Starting a clinic requires planning, long-term thinking, and a thorough understanding of the veterinary office lease.

The Storyboard: Outlining the Plot

Before starting or opening a veterinary clinic, it’s important to understand your current situation and what your career goals are as a business owner. A young veterinarian fresh out of school will have different needs and goals than an established, end-of-career veterinarian. Identifying your needs and career goals will clarify what your office lease should do for you.

  • Consider what type of veterinary care you will offer down the line. Many leases contain limitations in their “use” provisions that disallow you to grow and expand your services (ex. a veterinarian expanding their services to offer pet grooming and/or boarding).
  • If you’re planning to start a veterinary clinic in a dense urban area, a detailed exclusivity clause will be an asset as it will prevent your landlord from the ability to move competing businesses into the building or center.
  • What does your career trajectory and timeline look like? If you’re close to, or are planning to retire or sell your veterinary clinic in the next 5 years, the last thing you want is any legal obligation or financial penalty as you transition into retirement. Assignment provisions in your lease should be written in detail to support your future transition plans, protecting you from continued personal and financial risk.

Create a plan that will clearly define your budget, timeline and long-term business and professional goals. The office lease should support your objectives, not hinder your ability to achieve them.

The Plot Thickens…Veterinarian Office Lease

The veterinary office lease is a legal agreement, often 30 to 60 pages or more, containing technical jargon and harmful clauses that can pose significant and expensive risks to a vet. While it may seem like an onerous process, the review and negotiation of your lease can either set you up for success or drive your clinic to the ground.

What to Look for in the Office Lease

  • Liability: Who is guaranteeing the lease, you or your incorporated business? If you are personally named as the tenant, your landlord can hold you financially liable for defaults of the lease, even after you transition or sell.
  • Growing Your Business: You’ll want to ensure that the lease allows you to bring in associates and expand your services.
  • Clinic Relocations:  Unexpected clinic relocations are very real and can be financially devastating. Ideally, the “relocation clause” will be structured to prevent a move by your landlord. In the event that a relocation does occur, setup this clause to ensure that your landlord is required to pay for all moving and build-out expenses, and that the new premises is comparable in size, location, etc., to your current space.
  • Selling the Clinic: Does your lease permit you to sell the clinic and retire down the line? Many leases can prevent a veterinarian from selling their practice, or entitle the landlord to proceeds of the practice sale as a form of “consideration”. Ensure you have the flexibility to transition seamlessly and profitably with a properly set up “assignment clause”.

Veterinarian Taking Care of a DogHappily Ever After

Before you commit to a new clinic location, ensure that the details in your lease are right for you. Landlords typically write the terms of the lease in their favor, giving them a villainous advantage over you, the tenant. By reviewing the terms of the office lease in the early chapters, a veterinarian can write their own happy ending and set themselves up for long term clinic success.

Schedule your personalized office lease consultation with an expert today!

[ninja_form id=’396′]

What happens when you sign a bad lease?