Articles

Expenses

How to save money on your expenses, and what terms and conditions are worth the fight?

We created this guide to help healthcare practices better understand what they’re signing up for.

First, what are they? Most healthcare practices are going to be at properties that have NNN leases. This means the tenant pays their portion of the three “nets” or operating expenses:  property taxes, landlord’s insurance, and Common Area Maintenance (CAM). In SE Michigan, the nets for a medical office are often a quarter to a third of your total occupancy cost. Pay attention to any terms regarding the expenses!

My advice, do not waste time trying to push for “capping controllable expenses”. Most lease guides will tell you to do this, but in reality, the fight over what counts as “controllable” vs. “uncontrollable” is hard and rarely lands cleanly. Landlords will define almost everything as uncontrollable when it suits them.

The better approach is to negotiate an explicit list of carve-outs for specific items the landlord cannot bill for. My list includes:

  • Audit rights for property taxes and the landlord’s insurance.

  • Cap-controlled CAM increases at 3-5% per year. (This is hard to get, but worth the effort trying.)

  • Exclude from the CAM charge, by name:  landlord’s capital expenditures, leasing commissions, depreciation compliance upgrades, and general overhead.

  • Exclude big ticket items, by name:  roof replacement, HVAC system replacement, parking lot replacement or resurfacing, structural repairs, facade work, ADA compliance upgrades. These should be considered capital expenditures, not maintenance. Don’t let the landlord bill you via CAM for these as “repairs”.

If you’re going to do anything, get exclusions for these big capital expenditures. A parking lot replacement charged in CAM is one of the most common items and a perfect example of the bigger pattern:  a $300,000 capital project the landlord labels as “maintenance” and bills back to tenants over a few years. Landlords will use the same tactic for roof replacements and HVAC system replacements. If your lease doesn’t list these as excluded costs, the landlord can and will argue they’re fairly included as maintenance, and if you choose to push back, your attorney will be fighting on rough terrain.

For more on this topic, check out the Commercial Real Estate Operating Expenses article on our website.

We hope this guide was helpful! Like with a residential home, the costs of expenses can really creep up on you, and we find clients often don’t focus on these terms enough.

Let us know what you think. We’d love to hear from you!

 

Recent:

No results found.
View All Articles

What Our Clients Are Saying

Remy was very helpful and straight forward with me about the challenges of starting a practice. He kept me well informed and was very proactive, a professional in every aspect of the real estate business. I could not have navigated this process without him; I will definitely use Remy for our future growth needs.

Dr. Kevin Semma, OD

Remy has been an indispensable part of my journey to build a veterinary practice. I had another commercial realtor that was not familiar with veterinary profession when Remy reached out to me. When I decided to stay with my previous realtor, Remy was willing to answer any questions I had or help in any way, even though I was not signing with him. I felt he genuinely wanted my business to succeed and wanted to help. Soon I realized the importance of having a realtor who has special knowledge of the healthcare field when choosing a space and decided to reach out to him. Remy is very professional, relaxed, and inviting. He brings his own expertise as well as others to consult about different aspects of building a practice. Remy is available, thoughtful, supportive, and assists in problem solving concerns that arise. The process was less stressful, because he was a partner in the process, not just a realtor. I have and will continue to recommend him for any commercial real estate needs.

Dr. Katie Boatman, DVM

Working with Mirlo Real Estate Partners was a great experience, and I could not be more impressed with the level of service I received. From the very beginning, Nick and Remy helped me establish my preferences and outlined the best strategy for my specific situation. Not only werethey able to find the PERFECT space for me in a brand new medical office building, but due to the tight deadline, they were also able to find me an OUTSTANDING temporary space to occupy during the construction period to minimize downtime for my practice. Their hard work and dedication really made the transition seamless. Their knowledge of my needs and the market was STRONG and helped me achieve VERY FAVORABLE terms. I would highly recommend them to any healthcare provider for their commercial real estate needs.

Dr. Alon Kahana, MD, PhD

We are incredibly grateful to Remy Isdaner for guiding us through the challenging journey of starting our veterinary practice. Remy’s knowledge was deemed invaluable from the outset, assisting us in every aspect of the startup process. Remy found just the right building, and it wasn’t even on the market. He contacted the owners and successfully negotiated a favorable deal, making our dream of owning a practice a reality. Remy’s professionalism, persistence, and genuine care for our success truly set him apart. We highly recommend Remy to any business owner needing support with their business endeavors!

Dr. Krysten Andrews, DVM & Dr. TJ Vernaci, DVM

As an established oral surgeon, I can wholeheartedly recommend Remy Isdaner and Mirlo Real Estate Partners to any medical professional seeking to start or expand their practice. Not only did Remy advocate and fight for my best interest, but he also demonstrated an unparalleled understanding of my industry, exceeding my expectations and making the process as smooth as possible. With Remy taking so much off my plate I was able to focus on building and marketing my business, allowing me to open my doors with a full schedule of patients. I could not be more satisfied with my experience working with Remy and my new, state-of-the-art oral surgery practice.

Dr. Robert John, DDS, MD

I am thrilled to share my experience with Mirlo Real Estate Partners. As an oral surgeon, the thought of handling a commercial real estate transaction and the subsequent buildout of my new office was daunting. However, Mirlo made the entire process seamless and efficient. From the outset, they were attentive to every detail of my requirements. Their knowledge and professionalism were evident as they guided us through each step, ensuring that every aspect of the deal was executed at the highest level. Nick and Remy worked hard to advocate for us and were committed partners in our success. Thanks to their exceptional service, I am now operating in a state-of-the-art facility, perfectly suited for my patients and staff. I wholeheartedly recommend Mirlo Real Estate Partners to anyone looking for a reliable and highly competent commercial real estate partner.

Dr. Jeffrey Wasielewski, DDS, MD, MBA