Subleasing Medical Office Space in Maryland: 7 Facts to Know

subleasing medical office space in Maryland

High overhead costs associated with leasing medical office spaces can strain your budget and limit growth opportunities. It’s frightening to take on a new medical office lease, as they can be expensive and inflexible. 

Subleasing medical office space in Maryland provides physicians with access to high-quality office space at a lower cost with greater flexibility than traditional leases. This allows practices to start or expand without the burden of long-term commitments or excessive overhead expenses.

In this article, we’ll talk about 7 things to know and plan for before signing a lease with a new subtenant.

Understanding Subleasing

Subleasing is an arrangement where you—as the original tenant—rent out part of your leased space to another party, known as the subtenant. In traditional leasing, you directly lease the property from the property owner.

When you sublease, you become the sublandlord, while still being responsible for the terms of your original lease agreement.

Benefits of Subleasing Your Space

  • Reduce overhead costs by sharing your space with another tenant
  • Gain flexibility in the length of your lease commitment
  • Adapt to changes in your practice size or location needs

7 Things You Need to Know Before Subleasing Medical Office Space in Maryland

1. Lease Agreement Restrictions

Before you start subleasing medical office space in Maryland, carefully review your current office space lease agreement. Go through all the terms and conditions. Pay close attention to any sections that discuss subleasing or assignment of the lease.

Identify any restrictions or limitations on subleasing outlined in your lease. Some common restrictions may include:

  • Requiring the landlord’s prior written consent for subleasing
  • Limiting the types of businesses or practices allowed to sublease the space
  • Specifying a minimum or maximum sublease term

If your lease contains restrictions, you’ll need to obtain the necessary permissions from your landlord before subleasing.

Be prepared to provide your landlord with information about the potential subtenant and the terms of the proposed sublease agreement.

2. Zoning and Compliance

Before signing a sublease, make sure your office space meets all the zoning requirements and regulations specific to the type of business you’re preparing to sublease to.

Zoning laws can vary by market location and business type, so you’ll need to research the specific requirements.

Accessibility and safety standards are also crucial considerations when subleasing medical space. Verify that the space meets the requirements of the Americans with Disabilities Act (ADA) and any other applicable accessibility standards.

3. Sublease Agreement Terms

When drafting your sublease agreement, carefully consider your proposed terms and conditions. Start by determining the length of the sublease term. Be sure that it aligns with your current lease agreement and meets any prerequisites set by your landlord.

A longer sublease term may provide stability, but a shorter term offers more flexibility.

Next, establish the rent, utilities, and other lease-related costs. Be transparent about how these costs will be divided between you and your subtenant.

Will the subtenant pay a fixed amount each month, or will costs be prorated based on the percentage of space occupied?

Lastly, clarify the responsibilities for maintenance and repairs. Determine who will be responsible for routine upkeep—such as cleaning and minor repairs—as well as more significant maintenance issues that may come up.

Outlining these terms clearly and upfront means you can avoid potential conflicts and guarantee a smooth subleasing agreement.

4. Tenant Screening

Before signing a lease with a new tenant, do your due diligence. Screen potential subtenants thoroughly. You want to protect your interests and secure a successful subleasing agreement above all else.

Conduct thorough background checks on potential subtenants, including:

  • Criminal background checks
  • Verification of professional licenses and certifications
  • References from previous landlords or colleagues
  • Check their creditworthiness and financial stability

Check their creditworthiness and stability by requesting financial statements, tax returns, or other documents to verify that the subtenant has the means to pay rent and fulfill their obligations under the office sublease agreement.

Finally, consider whether the subtenant’s practice aligns with your own. Subleasing to a complementary practice can create opportunities for collaboration and referrals. But subleasing to a direct competitor may lead to conflicts of interest.

5. Space Modifications

When subleasing medical office space in Maryland, consider any modifications required to accommodate your subtenant’s needs. This could include reconfiguring exam rooms, adding or removing walls, or updating fixtures and finishes.

Once you’ve identified the necessary modifications, determine who will be responsible for bearing the associated costs. In some cases, the subtenant may be willing to cover the expenses in exchange for a reduced rent or other concessions. You can also absorb the costs yourself so you can attract a high-quality or complimentary subtenant.

Establish clear guidelines for restoring the space upon termination of the office sublease, which may involve specifying that the subtenant is responsible for removing any modifications and returning the space to its original condition.

6. Insurance and Liability

Before making any major decisions, review your current insurance policy and check if your policy will cover a subtenant. Your policy should protect you against potential liability issues—such as property damage or personal injury claims.

It may also be wise to require your subtenant to obtain their own insurance coverage, including general liability insurance and any other specialized coverage for their specific medical practice.

Address potential liability issues directly in your sublease agreement. For example, you could specify that your subtenant is responsible for any damages or injuries that occur within the subleased space, as well as indemnification clauses that protect you from legal action arising from the subtenant’s actions or negligence.

7. Sublease Termination

When subleasing medical office space in Maryland, it’s vital that you plan for when the lease expires.

Specify the conditions that allow either party to terminate the sublease early, such as breach of the agreement or significant changes in business circumstances. Clearly outline the required notice period and any penalties or fees associated with ending the lease early.

Set expectations for the condition of the space upon termination of the sublease. Require the new tenant to return the space in the same condition as when they took occupancy, allowing for normal wear and tear.

Key Takeaways

  • Before you sign a subtenant, review your current lease agreement for any restrictions on subleasing healthcare office space.
  • Determine the sublease term, monthly rent, utilities, and maintenance responsibilities in the sublease agreement.
  • Conduct thorough background checks and verify the financial stability of potential subtenants.
  • Assess the need for space modifications and establish guidelines for restoring the space upon sublease termination.
  • Review your insurance policy and require the subtenant to obtain their own coverage.
  • Specify the conditions for early termination.

Contact United Development Realty to Find the Perfect Space for Your Medical Practice

Finding the perfect space for your practice can be incredibly challenging. We’re here to help. Our experienced healthcare brokers can help you find the perfect space, negotiate favorable terms, and navigate subleasing[1] .

It’s your job to focus on exceptional patient care. It’s ours to set up your practice space for success.

Get in touch today or call us at (240) 221-1976 for a risk-free consultation.

FAQ

How do you negotiate terms with a sublessee to promise operational continuity?

  • Define clear operational guidelines that describe the responsibilities of both parties regarding maintenance, utilities, and shared facilities to ensure smooth operations.
  • Account for flexibility for unforeseen circumstances by including clauses that allow adjustments to the lease terms in case of regulatory changes or emergency needs that could impact daily operations.
  • Set communication expectations by agreeing to regular check-ins and updates with your subtenant to promptly address any issues.

About Charles Peacock

Over the past 30 years, Charles has been involved in Maryland real estate sales & leasing, property management, real estate investment, and the construction industry. He is a licensed commercial real estate broker, specializing in the representation of both tenants and landlords, as well as medical and dental professionals. Charles has also represented several medical building owners.