Veterinary Space for Lease! Cool but what do I need to know?

Many veterinarians make crucial mistakes when leasing property for their clinics, often because they underestimate the complexity and long-term implications of lease agreements. One of the most common pitfalls is not fully understanding all that is tied to a lease agreement. Beyond the base rent, leases for veterinary practices can and often include additional rent costs such as property taxes, insurance, maintenance, and repair costs—commonly found in triple net leases. Not being aware of these additional costs can result in significant expenses that affect the clinic’s profitability, especially if it’s an unwanted surprise (kind of like that dog that comes in sniffing like they rolled in a cow patty).

Lease pitfalls

Another major mistake is overlooking or accepting lease terms that restrict business growth or flexibility. Landlords may insert clauses that limit the ability to bring in associates, sublet, or assign the lease to a new buyer in the event of a sale.  Maybe you want to have a dentist or groomer rent space? If you have the slightest feeling this might happen, it’s important to think about that before finalizing a lease.  Assignment and subletting clauses are especially important for veterinary clinics, as business transitions are common. Without careful attention, veterinarians may find themselves unable to sell their practice or forced to ask for landlord approval under restrictive conditions, sometimes remaining liable for the lease even after selling the business.

Property Maintenance

Veterinarians should also be aware of maintenance and repair obligations in triple net leases. Many agreements require the tenant to maintain and repair essential systems such as HVAC, plumbing, and electrical. If these systems are in poor condition at the outset, the veterinarian could be responsible for costly repairs soon after moving in. A good agent will make sure these systems are in working order or maybe under some sort of warranty before signing any lease.  It is critical to conduct thorough due diligence and clarify, in writing, who is responsible for specific repairs before signing the lease. The last thing a practice wants is a broken HVAC mid summer and no clear direction on who will pay for the repair or replacement.

It is always advisable to have a real estate attorney (not your good buddy who does criminal litigation) review a lease. That said, attorneys are human, and they might miss things. For example, make sure that anything during the build out phase clearly spells out who pays for what. For instance, ADA compliance interior or exterior to the space. Most often, interior is covered by the tenant, exterior by owner but not always. Similarly, if the space requires PG&E upgrades, it’s important to ensure that those costs and who bears them is clear.

Barking and meowing

Other things to consider depending on location of the space: noise. A lease contract whereby, if any tenant above the practice complains about noise, the practice owner is fined $150 per occurrence. As you can imagine, this turns into an issue for the owner of the practice, the building owner and even the bank funding the practice! These are things that a broker with experience in veterinary specific leasing and animal health can be invaluable (again, along with an attorney).

To avoid these mistakes, veterinarians should engage an experienced veterinary lease broker and attorney to review and negotiate terms. Ideally, there is transparency on all costs, fair assignment and subletting rights, and balanced responsibilities for maintenance and repairs. By carefully scrutinizing lease agreements and not rushing into signing, veterinarians can set their clinics up for success for years to come.

A few references:

https://www.dvm360.com/view/a-closer-look-at-veterinary-real-estate

https://www.dvm360.com/view/tips-for-successfully-negotiating-a-commercial-lease

Construction considerations