Animal Health Solutions

20 Covetrus | ph: 855.724.3461 | fx: 888.329.3861 | northamerica.covetrus.com About the author Eric Pook is the President of Cirrus Consulting Group, North America's preeminent commercial real estate and office lease negotiation firm for veterinarians. Eric has been consulting small businesses since the late 90's with an emphasis on revenue creation and cost mitigation. Eric advises doctors each day on how to successfully leverage the veterinary office lease agreement to maximize practice value while reducing risk and liability. You can contact Cirrus at 1.800.459.3413, info@cirrusconsultinggroup.com or cirrusconsultinggroup.com. Options to renew After a lengthy negotiation with your landlord, you're pleased that they have provided you with two additional five-year renewal options so that you or a future buyer can remain in the space for years to come. You are confident that this is of great benefit to you as your clinic has just become much more "sellable". In principle, perhaps yes, however in reality, maybe not. Have you checked the language in your "options to renew"? Options for a future buyer Many renewal option provisions state that they become null and void if the tenant's lease is assigned or subleased. The renewal option that you thought you had may in fact not exist when you sell your veterinary clinic and assign the lease to a future buyer. A lease without substantial term directly impacts the value of your animal hospital in the eyes of a buyer; and they will likely need a long enough term to satisfy their lender. Determining rental rates Many "options to renew" state that rental rates will be negotiated by the tenant and the landlord at the end of term; however, many options do not specify the process involved in determining this amount if the parties disagree, causing you to remain in limbo over a rental dispute. This situation can be avoided by adding language stating that your rent will be determined based on a review of comparable properties in your market, and that if necessary, a third party will determine the rent if you and your landlord cannot agree on the amount after a set number of days. Demolition/redevelopment clause Imagine getting a notice from your landlord that the building you practice in will be undergoing a major redevelopment. Your landlord sees dollar signs where you simply see a great practice location. Landlords have been known to maximize the value of their real estate investments by inserting terms and clauses into leases that pose significant long- term financial risk to the tenant. One strategy they use is building flexibility into the lease agreement. This flexibility often appears in the form of a "demolition/redevelopment" clause, also known as lease termination rights for your landlord. Essentially, these provisions enable the landlord to terminate your clinic lease early, should a redevelopment opportunity arise. As off the wall as it sounds, the land in which your veterinary practice is located may be worth more if redeveloped as a 30-story condominium building. The good news is that there are some strategies available to try to minimize the effects of the dreaded demolition / redevelopment clause at lease negotiation time. In summary, while all of the above are some of the more critical clauses found in veterinary office lease agreements, they by no means encompass all of the potential pitfalls that you may encounter in your lease. It is critical that you review your lease agreement in detail, whether you are renewing your lease or are starting a veterinary clinic and have been presented with a new one. It's recommended to consider hiring a professional office lease negotiation firm to represent you. Your veterinary clinic is a precious investment that is an essential component of your business and overall success – review the lease agreement, and remember that it's certainly not all about the rent! Schedule a complimentary 30-minute consultation call Cirrus Consulting Group is North America's preeminent office lease negotiation and tenant representation firm for veterinarians. Founded by doctors for doctors over 27 years ago, they are passionately devoted to improving the business of healthcare by supporting the people within it, including veterinarians, dentists, family physicians, and more. Whether you're a veterinarian who is starting a clinic, buying or selling a clinic, relocating, expanding, planning for retirement, or seeking advice about how to manage the lease portfolio, Cirrus Consulting Group's negotiation experts can help. Schedule a complimentary 30-minute consultation call with one of their veterinary real estate and leasing experts by visiting cirrusconsultinggroup.com/contact.

• Cover