Hospital/Physician Leases Compliance Checklist

Health Care and Life Sciences   |   June 30, 2016

LEGAL REQUIREMENTS: A "no" answer to any of the following questions may mean your lease is out of compliance with applicable laws.

  • Is the lease in writing?
  • Is the lease signed by both parties?
  • Does it specifically identify the leased premises?
  • Is the term at least one year?
  • Is the space reasonable and necessary for the proposed use?
  • Is rent set in advance?
  • Is rent at fair market value (FMV)?
    • Tenant Improvement Allowance and other landlord concessions impact FMV.
    • Rent does not take into account the volume or value of referrals.
  • Is the tenant entitled to exclusive use, except for common areas?
  • Is the lease commercially reasonable, even if there were no referrals between landlord and tenant?
  • Are holdovers limited to six months?

COMMON PROBLEMS: Once you have confirmed compliance with Legal Requirements, look for these common problems.

  • Signature missing or not timely obtained
  • Dates of signature omitted
  • Escalators not imposed (when contractually required)
  • Missed rent payments
  • Holdovers permitted past six months

WARNINGS: Both federal and state laws may be implicated. Some of the federal laws are noted below; check for state law counterparts and related legislation.

  • The Stark Law
  • Anti-Kickback Statute
  • False Claims Act

SOLUTIONS: If you identify any failure to meet legal requirements or other problems with your leases to physicians, determine if any other exception or safe harbor applies. If not, develop a strategy to bring the leases into compliance and determine whether other legal action is necessary or recommended.

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