The dental attorneys at Nardone Limited in Columbus, Ohio frequently negotiate lease terms on behalf of dental clients. In Part 1 and Part 2 of this series of articles addressing important terms that every dentist should consider before entering into a lease agreement, we focused our discussion on exclusivity, the lease term, use restrictions, parking, and signage. In Part 3 of this series, we discussed the importance of fully understanding each party’s maintenance and repair obligations with respect to the premises. In Part 4 of this series, we recommended negotiating a purchase option and right of first refusal in certain circumstances. In this final article in the series, we focus on specific terms to consider when leasing an office condominium—a situation that is very common in the dental industry.
With the emergence of health complexes and office parks, the office condominium has become a relatively common form of owning a dental office. Office condominiums work substantially similar to the more widely known residential condominium, where the individual owner generally owns and controls the interior of the unit or office, while the building itself and the common elements of the property are collectively owned by all of the unit owners. When entering into a lease agreement for a dental office, it is important to understand whether the space is part of an office condominium. This situation often arises during a dental practice sale, where the selling doctor owns the office condominium and intends to lease the space to the buying doctor upon completing the sale transaction. Why is it important to know whether the premises is part of an office condominium? Because disputes can arise if the tenant has not done his due diligence and the lease terms are inconsistent with the condominium declarations, bylaws, or rules and regulations.
Due Diligence Regarding an Office Condominium Lease
Once the dentist tenant learns that the space is part of an office condominium, he should immediately request copies of the governing documents for the office condominium, including the condo declarations, bylaws, and any rules and regulations promulgated by the condominium association. It is far too common that the landlord does not possess the governing documents and needs to request copies from the association—which may take some time to obtain. Thus, it is the best practice to request the governing documents as soon as possible so that the transaction is not delayed. Once the dentist tenant receives the governing documents, he should review and fully understand all restrictions regarding the dental office space, along with all unit owner and lessee obligations set forth in the documents.
For instance, are unit owners responsible for paying regular assessments towards the upkeep of the common areas? What about special assessments for capital improvements? The condominium bylaws typically address regular and special assessments, and how those are calculated. It is then important to negotiate with the landlord, and address who is responsible for paying those assessments in the lease agreement. If the dentist tenant will be responsible for paying the regular assessments, but not the special assessments, then the lease needs to specifically state those responsibilities.
The dentist tenant should also fully understand any restrictive covenants or prior approvals that are required regarding the premises. As an example, if the dentist tenant wants to install a hanging sign or make certain changes to the exterior of the building, does he first need to submit plans to the condo association and obtain its prior approval? While the lease agreement may give wide leeway for installing signage, there may be more restrictive terms in the condominium bylaws. A prudent tenant will review and fully understand any restrictions contained in the documents governing the condominium, and then make sure the terms of the lease agreement are consistent.
Contact Nardone Limited
To the extent your proposed lease arrangement involves an office condominium, the dental attorneys at Nardone Limited can provide the necessary guidance to protect your interests. Contact Nardone Limited for a consultation.