Animal Health Solutions

22 Covetrus | ph: 855.724.3461 | fx: 888.329.3861 | northamerica.covetrus.com 4. Understanding operating costs Operating costs are the expenses related to the operation and running of the building. It's important to ensure that you have the right to review/audit statements of operating costs written into your lease agreement, affording you the transparency of knowing exactly what you're being charged for. Unfortunately, some landlords have been known to pass on various unreasonable expenses to their tenants, filing them under the term "operating costs." Here are some examples of unreasonable expenses: • Improvements made to the property to increase its value that doesn't affect you. • Building repairs. • Real estate broker commissions. • Professional fees that are unrelated to your unit. • Interest or principle payments on mortgages or debt costs (unless it is your debt or tenant improvement allowance). • Common area maintenance charges on vacant space in the building. • Marketing fees that do not increase traffic to the building and are not helping your business. • Administration Fees – ensure you're not overpaying in administration fees. Also, be aware that "administration fees" and "management fees" mean the same thing; make sure you're not being charged twice. 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. 5. "Surrendering" the space at sale time Any veterinarian who has built out their clinic from scratch knows firsthand that converting an empty space into a functioning animal hospital is expensive. It is typical for veterinarians to spend $100-$150 dollars per square foot to build out a new clinic, easily amounting to hundreds of thousands of dollars. Now thinking long-term, when you decide to relocate, retire, or sell the practice, the Surrender clause in your lease agreement will dictate how you are to leave the space when you exit the premises. To avoid the costs related to the demolition and reconstruction of the space, try to negotiate the wording of the "Surrender of Premises" clause in your lease to release you from the liability of having to restore the space back to its original shell condition (base building standards) when you vacate. These are just some of the ways to lower lease costs and protect yourself from expensive traps in your veterinary office lease. However, the best way to ensure that your lease is set up with economic and risk-free terms is to have the agreement reviewed by professional Veterinary Office Lease Negotiators before you sign or renew it. Negotiating a healthy lease now could prevent you from paying more later. SUCCE SS

• Cover