Medical and allied health premises are rarely just ordinary shopfronts or offices. A doctor, dentist, psychologist, physiotherapist or clinic operator may be signing a lease, taking an assignment, using rooms under a licence, buying a practice, or combining several of those arrangements at once.
The legal review should focus on what the documents actually allow the practice to do, what approvals and consents are needed, what costs and fit-out obligations apply, and what happens if the practice later expands, sells or exits the premises.
This guide is general information for NSW premises and business-document due diligence. It is not healthcare regulatory, Ahpra, Medicare, privacy, clinical-compliance, building-code, tax, valuation, finance or investment advice.
Why medical practice premises need careful legal review
A medical or allied health premises arrangement can affect the day-to-day operation and future value of a practice. The premises may need treatment rooms, reception space, signage, plumbing, waste arrangements, accessible entry, car parking, after-hours access, equipment areas and room-sharing flexibility.
Those issues should be checked against the lease, licence, disclosure material, fit-out documents, body corporate or strata rules, council or planning position, and any business purchase agreement.
For tenant-side lease support, see our commercial and retail leasing for tenants service page.
Lease, licence, sublease or business purchase?
The first question is what kind of arrangement is being signed. Similar-looking premises can be documented in different ways.
A clinic operator may be:
- entering a direct lease with the landlord;
- taking an assignment of an existing lease from a seller;
- subleasing part of a larger premises;
- using consulting rooms under a room licence;
- sharing rooms with other practitioners or contractors;
- buying a practice where the premises rights are tied to goodwill; or
- buying a property that will be used as practice premises.
Each structure has different legal consequences. A licence may give less control than a lease. A sublease may depend on the head lease. An assignment may require landlord consent. A business purchase may fail commercially if the buyer cannot secure the premises rights needed to operate after settlement.
If the transaction involves buying the premises as property rather than only leasing or licensing it, our broader property law service page may also be relevant.
Does the Retail Leases Act apply?
The Retail Leases Act 1994 (NSW) is the current NSW statute to consider for retail lease issues. Whether it applies to a particular medical or allied health premises depends on the premises, use, location and lease arrangement.
It should not be assumed that the Act always applies, or that it never applies. The documents and circumstances need to be checked.
The NSW Small Business Commissioner explains that, when entering into or renewing a retail lease, lessors and lessees must sign a disclosure statement. The lessor's disclosure statement should include important information about the premises, lease and financial obligations, and should be given to the lessee at least seven days before the lease is entered into.
Disclosure material can be important because it may deal with rent, rent review, term, options, fit-out, refurbishment, outgoings, other costs, trading hours and known disruptions.
Permitted use and health-service operations
The permitted use clause should be checked carefully. A lease or licence that simply says "office" or "consulting rooms" may not be enough if the intended use involves particular health services, treatment rooms, equipment, signage, allied health practitioners, group classes, pathology collection, cosmetic procedures or extended trading hours.
Questions to consider include:
- does the permitted use match the services the practice will actually provide?
- does the lease allow reception, waiting areas, treatment rooms and administrative use?
- are there restrictions on signage, advertising, directories or window displays?
- are there rules about operating hours, access, deliveries or waste handling?
- does the building, strata scheme or centre have rules that affect the proposed use?
- are any council, planning, health, privacy or professional-regulatory checks needed separately?
A premises review can identify document issues. It should not be treated as a clinical, planning, building-code or healthcare-regulatory approval.
Fit-out, signage, access and make-good obligations
Medical and allied health premises often require more fit-out planning than a simple office. Treatment rooms, sinks, flooring, soundproofing, reception areas, accessibility, storage, signage, security, data cabling and equipment installation may all need to be considered.
The lease or licence should identify:
- who is responsible for fit-out works and approvals;
- whether landlord consent is required before works start;
- who pays for services, upgrades or compliance-related work;
- whether signage is permitted and where it can be displayed;
- whether after-hours access is available;
- whether parking or patient access is included;
- whether there are exclusivity or competing-use issues in the building or centre;
- what insurance is required; and
- what make-good obligations apply at the end of the term.
Make-good obligations can be expensive if the tenant must remove fit-out, reinstate premises, repair alterations or return the premises to a specified condition. The wording should be reviewed before the practice invests in fit-out.
Assignment, sale of practice and landlord consent
If a practitioner is buying or selling a practice, the premises rights often sit at the centre of the transaction. Goodwill may depend on the practice continuing from the same location, using the same consulting rooms, signage, phone number, equipment and local patient base.
A practice sale may involve:
- a business sale agreement;
- assignment of lease or landlord consent;
- transfer or replacement of a room licence;
- plant and equipment transfer;
- employee or contractor arrangements;
- supplier and service contracts;
- restraint or non-compete terms;
- patient transition communications; and
- settlement conditions tied to premises approval.
For business acquisition support, see our purchase of business and sale and purchase of business pages.
Room-sharing, contractors and subletting
Many practices use room-sharing, contractor or sessional consulting arrangements. A head lease may restrict assignment, subletting, licensing, sharing possession or allowing other practitioners to use the premises without consent.
Before signing, check whether the arrangement allows:
- independent contractors or sessional practitioners to use rooms;
- subleasing or licensing of spare rooms;
- shared reception, records, facilities or equipment;
- flexible hours or after-hours access;
- multiple trading names or practitioner names on signage;
- temporary cover arrangements; and
- future expansion or relocation within the building.
Room-sharing contracts should also be consistent with the lease. A room licence that breaches the head lease can create avoidable risk.
Costs, options, guarantees and exit risk
The financial terms need careful review, but legal review should not be confused with accounting, tax, valuation or finance advice.
Key document issues include:
- base rent and review method;
- outgoings and recoverable costs;
- fit-out contributions or incentives;
- bank guarantees, bonds or security deposits;
- personal guarantees or director guarantees;
- option terms and notice dates;
- relocation, redevelopment or demolition clauses;
- termination rights and default consequences;
- assignment conditions if the practice is sold; and
- make-good and equipment removal obligations.
Options and assignment rights can be especially important. A practice may be harder to sell if a buyer cannot obtain a lease assignment, enough remaining term, or a fresh option period.
Regulatory and privacy issues are separate checks
Premises documents are only one part of a medical or allied health business. Healthcare advertising, Ahpra obligations, Medicare, privacy, patient records, clinical standards, employment, workplace safety and building compliance may all need separate advice from appropriate advisers.
Ahpra's advertising guidance explains that practitioners and other advertisers have obligations when advertising regulated health services. Those obligations are separate from an ordinary lease or business purchase review.
A commercial lawyer reviewing premises documents can help identify where a separate health, privacy, clinical, building, planning, accounting or finance adviser may be needed. That is different from guaranteeing regulatory compliance.
When to speak with a commercial leasing lawyer
Legal advice before signing is particularly useful if:
- the lease, licence or assignment documents are incomplete;
- the permitted use does not clearly match the intended health services;
- the practice needs fit-out, signage, parking or after-hours access;
- the lease may be a retail lease and disclosure material has not been reviewed;
- room-sharing, contractors, subletting or sessional use is planned;
- the premises are part of a business purchase or sale;
- landlord consent or assignment is required before completion;
- there are personal guarantees, relocation clauses or make-good obligations; or
- you need the transaction structure explained before exchange or signing.
For broader agreement support, see our commercial contracts service page. For dispute context, see our guide on commercial law and litigation.
Need help reviewing medical practice premises documents?
Biz Lawyers & Advisory assists with commercial lease review, premises licences, assignment documents, landlord consent steps and business purchase documents connected with medical and allied health premises.
We can review the lease, licence, assignment or sale documents and help identify legal issues that should be clarified before signing. Where healthcare regulatory, privacy, Medicare, clinical, building, tax, accounting, finance or valuation issues arise, those should be reviewed with appropriate advisers.
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This article is general information only and is not legal, healthcare regulatory, privacy, Medicare, clinical, building, tax, finance, valuation or investment advice. You should obtain advice about your own documents and circumstances before signing.
