When it comes to finding the ideal tenant for commercial office space, veterinary tenants are desirable businesses to landlords.

Yet, veterinarians often fail to use this to their advantage when negotiating their veterinary office lease agreement. Before you enter into a new lease or renewal negotiation, here are a few things you should consider to understand why landlords favor veterinary tenants, and how you can leverage this in your upcoming negotiation.

Why Landlords Prefer Veterinary Tenants Over Other Commercial Tenants

Long-term Tenancy

Given the amount of work and large financial investment involved in opening a clinic/animal hospital, most veterinarians choose a location with the intent of staying 10-20 years or more. This means a long-term lease and options to renew/extend, translating into a promising and steady revenue stream for landlords.

Increased Foot Traffic

There’s no doubt that a veterinary clinic/hospital draws foot traffic to a building/center, which in turn is helpful for other businesses in the vicinity, adding value to the building and resulting in a win for the landlord.

How Landlords Use the Lease Agreement to Their Advantage

Landlords know very little about the business of animal care, but what they do know about are lease agreements. The standard veterinary office lease is typically 30–50 pages long, outlining the tenant and landlord’s obligations to one another for the duration of the lease term. The lease is engineered by landlords for their financial benefit, used to increase the value of their properties and maximize control.

Common Landlord-Favored Lease TermsVet with an orange cat

Unless your lease terms are thoroughly reviewed and negotiated properly, landlords generally have the upper hand. It is important to review and understand the provisions in your veterinary office lease agreement and amend them to your advantage before you sign. Here are a few common lease terms that veterinary tenants should pay close attention to.

Use Clause

The “Use” clause outlines, and potentially restricts, the type of business/service you may conduct in your space. For example, language may only permit “the practice of animal health” in the space; however, this language can be amended to allow for future inclusion of services such as grooming or animal boarding, giving you the flexibility to expand or bring in associates/specialists down the line.

Relocation Clause

The “Relocation” clause could allow your landlord to move you from one unit to another, usually to accommodate a higher-paying tenant who wants your space. Additionally, this clause is often written so the tenant bears the entire cost of the move.

Not only are unplanned relocations inconvenient and expensive, they are usually paired with several months of clinic dark time and loss of business/customer attrition. Veterinary tenants should aim to strike this clause from the lease or, at the very least, alter it to put the onus on the landlord to pay for moving expenses and cap the number of moves permitted over the lease term.

Assignment Provisions & Personal Guarantees

Two Veterinarians in the Office

Assignment provisions and personal guarantees in the lease impact the ability to sell your clinic. Many veterinarians are shocked to learn that they require landlord approval to assign the lease to a new tenant. Furthermore, personal guarantees can keep you personally liable for the lease terms after you’ve transitioned. If you can’t assign or remove yourself from obligations under the lease, then you technically cannot sell your practice.

In the event you can sell, it’s not uncommon that the landlord is entitled to proceeds of your clinic sale due to language in the lease; therefore, it is extremely important to negotiate these terms in your favor. Even if you do not have current plans to sell, this could change at some point in your career.

Landlords Like Veterinary Tenants, So Use This to Your Advantage!   

Given the many benefits to carving out the details in the office lease, it’s clear why landlords favor veterinary tenants. Landlords will put on their best poker face to make you believe they have the upper hand. It is up to you, the veterinary tenant, to know how to play your cards and use them to your advantage. Recognize the impact of the terms in your veterinary office lease and their impact on your clinic’s success, ability to operate, grow, and sell your practice. If your poker face needs work, consider hiring professional veterinary office lease review and negotiators like Cirrus to help secure fair and affordable terms on your behalf.

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