Most physicians will sign a commercial lease one to three times in their careers — at practice formation, at relocation or expansion, and at renewal. For the majority, it is the single most financially consequential real estate decision they will ever make. Yet most physicians approach it without dedicated advisory, relying on general commercial brokers whose understanding of clinical space requirements is, at best, superficial.
What follows is a practitioner's guide to the twelve lease provisions that PRAXIS negotiates on behalf of physician clients.
1. Permitted Use Clause
Defines what clinical activities you are legally entitled to conduct within your leased space. A poorly drafted clause can prevent you from adding new service lines, accommodating additional practitioners, or modifying your practice model without triggering a landlord consent process. Draft it broadly enough to encompass the full range of your anticipated clinical activity.
2. Tenant Improvement Allowance
Medical build-outs cost significantly more per square foot than conventional office construction — examination rooms, plumbing for hand hygiene stations, medical gas rough-ins, lead-lined x-ray rooms, clinical cabinetry. Negotiate a TI allowance reflecting actual medical build-out costs. This requires a broker who can present medical build-out cost data credibly to landlords unfamiliar with clinical tenants.
3. Renewal Options
Without renewal options, a landlord can decline to renew your tenancy — forcing a clinic relocation that disrupts patient care, damages your patient panel, and costs significant sums in new build-out and transition expenses. Negotiate multiple renewal options, specify the notice period required to exercise them, and cap rent escalation at renewal to a defined formula.
4. Right of First Refusal on Adjacent Space
Protects your ability to expand within your building. Without a ROFR, a landlord may lease adjacent space to an incompatible co-tenant or a directly competing practice.
"A medical lease is not a standard commercial lease with a healthcare tenant inside. It must account for how your practice operates now and how it may need to evolve over a decade."
5. Exclusivity Clause
Restricts the landlord from leasing other spaces in the building to practitioners in your specialty. Particularly important for specialist practices — a dermatologist or gastroenterologist who anchors a medical office building should not find a competing practice opening on the floor above them at year three of a ten-year lease.
6. Assignment and Subletting Rights
Critical for practice sale planning. Many physician leases are negotiated without considering this until a sale is being contemplated — at which point leverage is essentially zero. Ensure assignment rights are clearly granted with any landlord consent limited to reasonable grounds.
7. Infrastructure Provisions
Who is responsible for ensuring the space can accommodate your clinical infrastructure? Medical gas, dental compressed air and vacuum, HVAC for infection control, plumbing rough-ins for hand hygiene stations, lead-lined walls for x-ray rooms, electrical capacity for diagnostic equipment — these must be explicitly addressed in the lease, not left to verbal assurances.
8. Operating Cost Caps and Audit Rights
Net leases pass operating costs through to tenants. Without caps and audit rights, operating cost escalations can materially erode the economics of a lease that looked favourable at signing. Negotiate annual caps on controllable cost increases and reserve the right to audit operating cost statements.
9. Co-Tenancy Provisions
If your location decision was driven in part by the proximity of an anchor tenant — a major clinic, a diagnostic centre, a pharmacy — consider what happens if that anchor vacates. Co-tenancy clauses allow you to reduce rent, or in some cases terminate, if a specified anchor departs.
10. Relocation Clauses
Some landlord standard-form leases contain provisions allowing the landlord to relocate your tenancy within the building. For a medical practice, forced relocation carries real clinical disruption risk. Ensure any relocation right is either struck entirely or severely restricted with meaningful compensation provisions.
11. Lease Term Alignment
The lease term should be aligned with your clinical planning horizon. A ten-year term with renewal options may suit an established group practice. A solo physician at formation may be better served by a shorter initial term preserving optionality while still providing the stability a landlord requires to justify a TI allowance.
12. Early Termination Rights
Practices merge, dissolve, relocate, and are sold on timelines no physician can predict with certainty at lease signing. Early termination rights — typically conditioned on payment of a lease break fee — provide a structured exit mechanism protecting the physician from being bound to a space they can no longer use.
PRAXIS represents physicians and practice groups across Ontario and Alberta on lease negotiation, renewal, and acquisition mandates. Contact Mya Qi, MPH before you sign.
