Deciphering lease language
By Timothy Gay, DC

You’ve graduated from chiropractic college. You’ve made a decision to open your own practice. And you’ve found a great location for your office. But before you sign on the bottom line, understand what you are signing.

You may find that the lease provided by the owner of the building to be written in another language. This language may be foreign to you, but it is commonly spoken by leasing agents and real estate brokers.

Whether or not you use an agent or a broker, it’s important for you to understand their language. Here’s a quick glossary of terms.

• Lessor, lessee. The lessor is the owner of the property; you are the lessee.

• Price per square foot. This is the asking amount by the lessor or owner of the building for the amount of square footage you are asking to lease.

For example: If you want to rent 1,000 square feet, at $1 per square foot, the rental is $1,000 per month.

• Triple net. Triple net is a leasing term that takes into consideration the services and overhead of managing the entire building and that piece of overhead based upon your square footage. It is an addition to the monthly lease.

Triple net may include the taxes, garbage-disposal expenses, and care of common areas that all of the tenants use (such as hallways, foyers, elevators, landscaping, air conditioning units, or anything else that may require maintenance).

Triple net may have a cap or maximum that is added to the square foot price of your lease. For example: If you sign a lease for 1,000 square feet at $1 per square foot, with a triple net of 50 cents per square foot, your additional monthly cost is $500, for a total rent of $1,500.

• CPI clause. The lease may include a clause that links rent to an increase in the cost of living for your region. This increase would be reflected by an increase in the Consumer Price Index (CPI).

Tip: If the lease is attached to the CPI, make sure that it does not exceed 3 percent. Historically, the index has been under 3 percent per year for the last several years.

• Leasehold improvements. Leasehold improvements are all of the construction costs you may do to the interior of the rented space. They may include, but are not limited to, walls, electrical outlets, 220 direct current circuit outlet for the use of x-ray equipment, paint, insulation, and carpet.

In many cases, the landlord will make concessions to the lessee concerning free rent or leasehold improvements depending on the length of the lease or any additional expenses. The law of supply and demand is instrumental in your ability to work with the landlord in your area. If there are many vacancies in your area, you will have more leverage in negotiating who will pay for improvements.

To get the most for your money, remember these simple tips:

1. Rent a highly visible location.

2. Pick a leasing agent who has your interests in mind. (Sometimes the agent work for both lessor and lessee.)

3. Work the best deal you can with the landlord and then work it one more time.

4. Don’t go to the school of hard knocks. Take a class or use professionals to help you learn more about real estate and lease transactions.

Although this is not an all-inclusive leasing guidelines, they are important basic tips and terms what will help you on your way to creating a solid lease and a great future for your practice.

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Timothy Gay, DC, is the founder and director of Ultimate Practice Systems (www.ultimatepracticesystems.com), a chiropractic consulting and management company. He can be reached at 866-797-8366, by e-mail at ultimatepractice@sbcglobal.net, or through his Web site.