Many high NET optometry practices continue to thrive due to lower overall costs, with occupancy being a cost that comes directly off the bottom line. If you are an optometry practice paying more than 7% on occupancy, then you may want to renegotiate your lease agreement. If you are in the process of agreeing on a lease or will sometime in the near future, here is some information to keep in mind.
- Start negotiations here – There are two main areas to start negotiating that will determine your overall occupancy cost for the practice. The term of the lease and the rate. It is recommended that a 1-2 year lease with the option to renew. Keep in mind that rent increases and renewal should be
considered. - Beyond the Lease – What additional expenses will the landlord expect you to pay for? Will you have to pay additional amounts for land upkeep, or how about utilities? Ask for typical additional expenses that tenants have when they have leased this property in the past. Remember this is factored into your 7% occupancy rate for your Optometry Practice Budget.
- Maintenance and Repair – Are you responsible should the HVAC system
fail? How long is acceptable before the landlord replaces it? “Commercial leases vary regarding maintenance and repair – some stipulate that the tenant is responsible for all property upkeep and repairs while others specify that the tenant is responsible for systems like air conditioning, plumbing, etc.” – SBA.gov - Read the lease – I would highly recommend a good attorney!
- Additional Clauses – Will the landlord allow you to sublease? Protect your business with an exclusivity clause that keeps your competitor from renting on same property. Many properties have an anchor tenant that is a large draw for the smaller businesses. Can you get out of a lease if the anchor tenant leaves?
- Default? – As an optometrist, we never plan to fail, but if you do default on the loan, how long do you have before you are locked out or evicted?
A lease agreement directly impacts the cash-flow of your optometry practice. It is extremely important that you lease details are understood and that you negotiate a great agreement. I would highly advise seeking the counsel of an attorney to ensure that you set your optometry practice up for success.
