A QUICK BITE

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A QUICK BITE
DAVID FOY GEORGE RUNSTADLER
SCOTT RELF
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TONIGHTS AGENDA

• LEASES
• DUE DILIGENCE JOINING A PRACTICE
• EMPLOYMENT AGREEMENTS
• PARTNER AGREEMENTS

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LEASES A PRIMER

• (AKA WHAT TO LOOK OUT FOR)

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LEASES DEFINED

• Gross Lease -- Tenant pays rent,
• Landlord assumes all costs
• Net Lease -- Tenant pays rent, costs are
  allocated between Landlord and Tenant in Lease
• Costs -- Taxes, Insurance, Building Maintenance,
  Common area maintenance, Parking lot, HVAC,
  Plumbing, Electrical
• Single Tenant
• Multiple Tenant
• Major Components Landlord, Tenant, Premises,
  
  Rent and Term
• A Lease MUST be written and signed if it is to
  extend beyond a one year term

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LANDLORD Is he reliable?

• Has a long practice as a
• landlord with Tenants that
• are similarly situated
• If the Landlord has some responsibility for
  taxes, insurance, general maintenance or common
  area maintenance -inquire into ability to fulfill
  obligation
• May be better to assume some costs directly
  rather than dealing with an absentee or
  recalcitrant Landlord

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TENANT

• The Tenant should
• always be your PC or PLLC
• If personal guarantee required, dont have
  spouse be a guarantor
• May the Tenant add additional practitioners
  without additional cost?
• If the Tenant is a multi-party practice, does
  each practitioner guarantee the whole lease?
• Contribution agreement among the practitioners
  may be advisable

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PREMISES Clearly specify in lease

• Have premises been clearly delineated with legal
  description and schematic or graphically if not
  clear through words?
• Is space exclusive?
• Areas common to all tenants should be defined
  with particularity - if parking a problem, get
  assigned parking areas
• Determine the business of other tenants noise,
  parking, obnoxious activities, competing
  activities. It is possible to limit Landlords
  ability to lease to certain types of activities
  in a multi-tenant structure
• Does Landlord have the ability to relocate tenant
  within the structure? Who pays? Can you terminate
  if not acceptable?

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BUILDOUT/CONDITION OF PREMISES

• Are you accepting the premises as is? You are
  unless specified otherwise.
• Have all mechanical and structural items been
  thoroughly inspected before moving in?
• If the Landlord pays for buildout, he will
  probably get a management fee for the effort -
  If Landlord is to do it, get it in writing with
  detail as to quality , material and cost.
• If you do some of the buildout, get approval
  before commencement and coordinate with the
  Landlord.
• Is Landlord liable if premises are not delivered
  by a given date?

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COMMON AREA MAINTENANCEDoes the Landlord have an
incentive to keep costs at a reasonable level?

• Someone must pay for the parking lot, hallways,
  landscaping and general structural maintenance
  problems.
• Normal practice is to pass these costs to the
  tenants in proportion to the space rented by each
  tenant as it relates to the total space. This may
  be a problem if all Tenants are not similarly
  situated.
• Attempt to negotiate a fixed cost to be added to
  the basic rent for CAM.
• The Landlord then has an incentive to keep costs
  low.
• The danger is that the maintenance may not be
  done.
• In any event, get itemized statements supporting
  any charge.

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LEASE TERM

• If not expressly stated otherwise in writing, the
  lease term is month-to-month - must vacate on one
  months prior notice.
• Does the lease provide for a right to extend the
  lease or merely the right to negotiate a new
  lease right to extend must set forth the terms
  of the extended lease.
• An agreement to give a new lease at a fair rent
  is not an option to extend.
• An appraisal mechanism can be utilized but is
  very expensive.
• The right to renew or extend the lease is
  construed against the tenant.
• An option to extend is always highly desirable.
  

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HOLDOVER

• At the end of the lease term, the lease normally
  becomes a lease on a month-to-month tenancy,
  terminable on 30-days notice by either the Tenant
  or Landlord.
• If the lease does not provide for a
  month-to-month tenancy at lease term, Tenant will
  become a holdover/trespasser.
• If Tenant holds over beyond the time the Landlord
  lawfully terminates the lease, he can be held
  liable for damages suffered by the Landlord lost
  rent, lost tenant, etc.
• Treble damages may be awarded to Landlord if
  forcibly prevented from gaining lawful possession
  of leased premises.

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RENT, INSURANCEAND TAXES

• RENT
• What does the rent cover?
• It always includes the right to quiet
• enjoyment of the leased premises for
• the lease term. Additional Rent is the
  cost
• allocation between the parties.
• INSURANCE
• If Tenant must pay its proportionate share of
  the insurance costs, what would that be?
• Are the premises over insured?
• Are there tenants in the building that would
  cause insurance rates to go up?
• Landlord insurance does not cover tenant
  equipment - This needs to be acquired separately.
• If a portion of the building becomes uninhabited
  because of an insured loss, what happens to your
  practice? Can you terminate and move across the
  street or must you wait until all the repairs are
  made before commencing your practice?

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RENT, INSURANCE AND TAXES CONTINUED.

• TAXES What is your proportionate share?
• Real estate tax valuations are capped.
• They can only increase by increase in consumer
  price index or 5, whichever is lesser.
• In most situations, value which property is
  taxed, its taxable value, is significantly less
  than appraised value.
• If there is transfer of property, the cap is
  lifted and the taxes increase.
• Improvements in other tenants premises may also
  cause an increase in taxes.
• Special assessments may also become Tenants
  responsibility.

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EQUIPMENT LEASE

• Generally, Equipment Leases are not Leases at
  all. They are financing instruments which place
  all risk and cost on the Tenant They are
  characterized by an option to acquire at the end
  of the lease term for an insignificant amount.
• Lessors have no reasonability to do anything
  other then enforce the rent payment and make
  sure it is insured with loss payable to the
  Lessor. In some equipment leases, the Lessor may
  not be required to use the insurance proceeds to
  repair the equipment but may apply the insurance
  proceeds to the money to be due under the
  lease.

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DUE DILIGENCE

• GOOGLE PRACTICE AND DENTISTS
• MICHIGAN LICENSE LOOK UP
• ASK COLLEAGUES
• STAFF RETENTION/TURNOVER
• LOCATION, LOCATION, LOCATION
• GROWING PRACTICE OR WINDING DOWN
• PATIENT CENSUS WHO WILL YOU SERVE?
• STEPPING STONE OR A NEW HOME

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(No Transcript)
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EMPLOYMENT AGREEMENTS

• JUST WHAT THE DOCTOR DID NOT ORDER TERMS YOU
  SHOULD KNOW
• 1. AT WILL vs. FOR CAUSE TERMINATION
• 2. BONUSES PERFECT BITE OR PULLING
  TEETH?
• 3. NONCOMPETE IS IT GEOGRAPHICALLY
  UNDESIRABLE?
• 4. INDEMNIFICATION/HOLD HARMLESS SHOULD
  YOU PAY FOR SOMEONE ELSES MISTAKE?

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AT WILL EMPLOYMENT

• WHAT AT WILL MEANS
• EXCEPTIONS
• AGE
• DISABILITY
• GENDER
• RACE, NATIONAL ORIGIN
• RELIGION
• HEIGHT, WEIGHT, MARITAL STATUS
• WHISTLEBLOWER

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AT WILL EMPLOYMENT CONTINUED.

• IS NOTICE OF TERMINATION REQUIRED?
• YOURE FIRED

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SAMPLE LIST OF FOR CAUSE REASONS

• Loss or suspension of license or insurance
• Malpractice
• Felony conviction including misdemeanor and moral
  turpitude
• Misappropriation of funds, embezzlement, bribes,
  kickbacks

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SAMPLE LIST OF FOR CAUSE REASONS CONTINUED.

• Material breach of employment contract
• Material misconduct, dishonesty, breach of
  fiduciary duties
• Failure to adhere to work policies/rules
• Alcohol or drug abuse
• Death or disability

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BONUSES HOW DETERMINED

• FORMULA
• BILLINGS OR COLLECTIONS
• OVERHEAD TAKEN INTO ACCOUNT
• NUMBERS AND SUPPORT
• THIRD PARTY AUDIT
• IS IT A MOVING TARGET?

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NONCOMPETES

• 1906 1985 NONCOMPETES
• ILLEGAL
• 1985 RETURN TO COMMON LAW
• REASONABLE IN TERMS OF DURATION, GEOGRAPHICAL
  RESTRICTION AND SCOPE

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THANK YOU
BERRY ? MOORMAN DETROIT
BIRMINGHAM ANN ARBOR