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Four Essential Tips When Negotiating Rent For Your Medical Property

Negotiating the amount of rent to charge for your medical property can be a complex task. Vastly different to residential and commercial leases, they require a lot of due diligence. However, the best outcome is one that works well for all parties, which is why you should consider these four essential tips when undertaking negotiations.

What is the length of the lease?

Agreeing on the length of the lease agreement is a crucial step in considering what the rental obligations for the tenant will be.

Many landlords prefer longer-term leases of five years plus as they provide more security. This means the lengthier the timeframe a tenant is willing to commit to, the more leverage there is when negotiating other parts of the agreement.

It’s not impossible to obtain a short-term lease, though. Tenants can be attracted to these because of the flexibility they offer. But there is a danger a landlord won’t renew it if another medical practitioner offers to rent the space out for a lengthier time frame.

Tenants may also be attracted to renew a lease after the initial term expires if there has been an expensive fit-out undertaken, so it’s worthwhile offering that when in the negotiation process (discussed in more detail below).  

Is a fit-out included?

Landlords often pay for some, if not all, of the buildout of a tenant’s space, so this is an important conversation to have when negotiating the rent of your medical property. Typically, you need to ensure the premises are suitable for use but after that, it’s up to the tenant and landlord to come to an agreement. Sometimes, landlords offer a contribution towards the fit-out, which is generally paid back upon completion, factored into the rent, or the premises are offered rent-free while the work is being done.

What outgoings will be payable by the tenant
What outgoings will be payable by the tenant?

What outgoings will be payable by the tenant?

Outgoings are the expenses incurred by the landlord in the operation, maintenance, or repair of the leased premises. These typically include:

  • Rates (including water and sewerage charges)
  • Land tax
  • Building insurance
  • Body corporate fees
  • Property management fees
  • Repairs, cleaning, gardening, and maintenance but excluding capital items and development costs.

Similar to when pricing a medical room for lease, before any lease agreement is signed, both parties need to agree on what outgoings will be passed on to the tenant. Landlords must disclose all outgoings to be collected from the tenant in the Lease and Disclosure Statement. Tenants must read and understand the Lease and Disclosure Statement.

How is the medical practice rental market?

When assessing what rent to charge for your medical property, ensure you study the current market to keep in line with expectations. A hot market will equal plenty of potential tenants and more scope for a landlord to set the price based on their desires, while a low-demand market will see landlords more willing to negotiate to get a deal done.

Gather intel by talking to commercial agents, as well as keeping note of what similar properties are leasing for in your suburb.

After these steps, you’ll arrive at the perfect price. 

Once these considerations have been explored, you should arrive at the perfect rental price. However, if you still find there is push-back, some landlords offer incentives rather than a reduction in rent to get a lease agreement signed. We recommend discussing this with your financial advisors, but as a general rule, lease incentives received by a tenant would be treated as assessable income. Read more about the implications of incentives using this link.

Across Australia, Medical Rooms Online is assisting health professionals to rent out their premises or rooms in a fast and affordable manner. If you’d like to know more about how we could be the answer to your leasing needs, simply call us on 1300 28 28 03 or email [email protected] today.

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