Animal Health Solutions

35 Q4 2021 | Animal Health Solutions If I were to ask you which part of your veterinary office lease agreement is the most important, what comes to mind? I doubt you would consider the assignment clause – the clause which governs your ability to purchase a clinic or transfer the lease alongside the sale of your veterinary clinic/hospital. You probably wouldn't think about the surrender clause – the clause which outlines how you are meant to leave your space when your lease term ends. Almost certainly you wouldn't think about the relocation or redevelopment/demolition clauses, which, if exercised by the landlord, could unexpectedly force you out of your space! No, I'm willing to bet you immediately thought the most important part of your lease is the rent. Well, I hate to be the bearer of bad news, but… it's not just about the rent! While rent is certainly one of the key components of any lease, I'm here to teach you that it should not be your number one concern. COVID has taught us… it's not just about the rent Who could blame you for believing otherwise? Rent is the most obvious cost that a veterinary tenant incurs. Sometimes the payment of that monthly cheque is the only contact a veterinarian has with their landlord all year. It is therefore no surprise when a veterinarian focuses entirely on achieving the lowest rental rates possible at negotiation time, completely ignoring the rest of the lease agreement. However, to be perfectly frank, this approach is just plain wrong. Rent may be an "obvious cost", but there are numerous hidden yet important costs that you should be more concerned about. Hidden costs vs. obvious costs in your veterinary office lease agreement An assignment nightmare One such hidden cost is often found lurking in the assignment clause, and if this clause is overlooked in favor of a rent-focused lease negotiation, it could cost you far more than what you're paying on a monthly basis. If your lease is structured in such a way that the landlord is entitled to "consideration" upon the assignment of the lease – a vague term that could encompass the proceeds of the sale of your business – you could stand to lose the value of your practice, which could amount to hundreds of thousands of dollars. If your lease will not permit the assignment of your tenancy upon the sale of your clinic or puts undue restrictions on your ability to do so, you could lose all the money that your buyer was willing to give you. This has significant long-term ramifications; not only could you lose the value of your animal clinic, but it could entirely scuttle your retirement plans. The far-reaching effects of this have more financial impact than the rent you're paying while in your space.

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