Do You Know When You Veterinary Office Lease Expires?

July 1, 2012 | Practice Management |

When was the last time you looked at your office lease?  Do you know when your lease expires?  Have you ever considered what happens if you miss a renewal deadline?  This article will help you to:

• Ensure that you do everything possible to avoid getting too close, or even past your lease expiry date without formally renegotiating a new lease term with your landlord.

• Understand what happens (in accordance with most lease agreements) if you do indeed miss your expiry date.

Why You Should Never Miss Your Renewal Deadline

If you do allow yourself to move past your expiry date, then you become a ‘month-to-month’ tenant, also known as an ‘overholding’ tenant.  This means that you have lost one of the most important protections that a lease agreement should afford to any
business practice – long term security to the space in which your practice is located.

Because of the huge investment you have made in the physical premises, you always need to ensure you have plenty of ‘term’, and multiple ‘options to extend’ your tenancy. Not only is this critical to avoiding or preventing a surprise relocation of your practice before you wish to do so, it is also one of the critical ingredients that adds value to your practice at the time of a sale and transition of the practice to another veterinarian.  Without a proper lease, and therefore, with no long term stability and security to the physical premises, the value of the practice at the time of sale diminishes.

Month to Month Tenancy

As soon as you move past your expiry date, you are a monthto-month tenant.this means, that technically, both you and your landlord each have the right to terminate the lease with
the other party by giving only thirty (30) days advanced written notice.

Can you imagine getting a letter in the mail today from your landlord terminating your lease 35 days from now because he/she decided to rent the space to an accounting office and they are moving into your office in just over a month?  Or even worse, he/she just completed a deal to give your space to another veterinarian.

We receive daily inquiries from professionals who missed their lease renewal dates and had their tenancy terminated because another tenant came along and offered the landlord a little more rent per square foot.

Double Your Monthly Rent

Letting your lease expire without renegotiation or renewal may lead to a significantly negative financial hit to your business.  Many lease agreements state that as soon as you go past your expiry date, the landlord now has the right to charge you twice (200%) the normal monthly rent for each month past the expiry date.

This means that if your rent is $4500/month, then your landlord will legally be able to charge you $9000/month for as long as you remain a month-to-month tenant.

Steps to Take

• Review your lease today and identify your expiry date.
• Double check your ‘overholding’ clause and find out what your penalty rents would be.

Knowing when to start the negotiation process is half the battle

Your landlord likely knows very little about the veterinary business.  What he/she does know is that as you get closer to the end of the term, there is less time for you to renegotiate properly, and the less time you have, the less leverage you have to negotiate a deal that works best for you and your business.

You should have a lease negotiation plan and strategy in place that will lead to the best possible outcome.  Waiting until a month before your lease expires will not deliver you optimal results… you have lost your leverage.  Creating your plan when you have more than 24 months remaining in your lease ensures your plan is based on meeting your objectives and is not driven by desperation.

If you have 24 months (or fewer) remaining on your lease, it is critical that you begin to prepare your strategy, plan your negotiation, and leverage the remaining time that you have to structure your lease properly.

Bottom Line: This article identifies reasons and strategies for re-negotiating a lease agreement before the lease expires.