We often see MOB and ASC leases that do not include terms that will maximize the value of medical real estate. Your lease is the most important factor in determining your medical real estate’s value. We help healthcare organizations maximize the value of their real estate by reviewing and advising on the key elements of medical facility leases.
Here’s a summary of the most important terms in a long-term medical facility lease. These terms directly impact financial performance, operational control, compliance, and investment value:
1. Lease Term & Renewal Options
Initial Term: Usually 10–20 years for long-term stability.
Renewals: Often includes multiple 5-year renewal options. Knowing future rent option rental rates and terms protects the tenant from unexpected rental rate jumps and costly renegotiates with the landlord.
Why it matters: Longer terms with renewal rights protect operations and enhance property value.
2. Rent Structure
Base Rent: The fixed monthly rate.
Triple Net (NNN) Lease: Tenant pays property taxes, insurance, and maintenance in addition to the paid base rent.
Fair Market Rent (FMR): Must comply with Stark Law and Anti-Kickback Statute—especially critical in physician-owned ASCs.
3. Rent Escalations
Annual Increases: Typically 2-to-3% or tied to CPI.
Why it matters: Protects landlord from inflation and preserves investment returns.
4. Use Clause
Specifies permitted use (e.g., “ambulatory surgery center and related healthcare services”).
Restricts uses that would violate zoning, licensure, or regulatory rules.
5. Compliance with Laws
Lease must explicitly state that it complies with federal and state fraud and abuse laws (Stark, AKS).
Often includes a legal compliance clause allowing rent adjustments to maintain compliance.
6. Maintenance & Repairs
Defines responsibilities for interior, structural, exterior maintenance and capital improvements.
Triple net leases provide a passive investment for the landlord and provide tenant with more facility control and decision power on maintenance and replacements.
7. Assignment, Subletting and Change in ASC Ownership
Restrictions or rules on assignment, subleasing or change in tenant ownership without landlord consent.
Important to maintain control over use and regulatory compliance.
ASC Realty Advisors will provide a “no obligation” review of your lease.