MedEsthetics magazines offers business education and in-depth coverage of the latest noninvasive cosmetic procedures for physicians and practice managers working in the medical aesthetics industry.
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LEGAL ISSUES leased space. But if the practice vacates the premises in good condition, then the good guy guarantor has no further obligations. The business will still have obligations under the lease, but the guarantor won't keep adding to his or her personal exposure. If you can control the practice's actions and make sure that the business leaves the rented space if it can't pay any longer, then a "good guy" guarantee is a reasonable option. 7. What If Your Landlord Goes Bankrupt? Your landlord probably has a mortgage on the building which your practice occupies. Typically, if the landlord stops paying the lender, the lender can foreclose on the building and evict you. If your business is critical to the success of the building, the lender may agree to give you the right to stay on even if the landlord stops paying. If you are a small tenant, you will almost never be able to negotiate this. But it doesn't hurt to try. These concepts are addressed in lease provisions called subordination, non-disturbance and attornment ("SNDAs") clauses. 8. Who Will Guarantee the Lease? Somewhere along the line, you probably read that you should form a corporation or a limited liability company so that you can protect your personal assets from business creditors. One scenario in which that otherwise excellent advice doesn't apply is when you sign your lease. That's because landlords want a guarantee that your business will pay its rent and perform its obligations under the lease. You usually have to give that guarantee personally, which puts all your personal bank accounts and property at risk. Some landlords don't ask for guaranties at all, which is ideal for tenants. Others may be willing to accept a guarantee from another business instead of from the owner or key employee personally. Even if the landlord insists on a personal guarantee from you, he may be willing to take a so-called "good guy" guarantee. A "good guy" guarantee states that the person who signs the lease promises to pay the rent and uphold the business' obligations so long as the business occupies the 26 JANUARY/FEBRUARY 2014 | MedEsthetics Many lease forms require the landlord to approve any sale before it is finalized. 10. Can You Put Up Signs? Most medical aesthetic practices put a lot of effort into branding and want their signage to be in keeping with their brand images. Don't assume that you can use your sign on the exterior of the building or in common areas inside the building. Landlords often have similar ideas about branding and want to make sure all their tenants' signs are uniform. While you are negotiating your lease, show your landlord your proposed sign and its location, and write the landlord's approval into the lease. If your sign is outside, it may have to conform to zoning and building code requirements. You may need a sign permit, and it may even have to be hung by a licensed sign hanger. While this sounds like a small detail, it illustrates how carefully you need to assess what you need from your lease and how to get it. If you can't achieve your negotiation goals, you can find different space that meets your needs. Or you can sign the lease and try to mitigate the problems you couldn't negotiate away. Jean Warshaw is a lawyer in private practice in New York City. She provides advice on business and environmental law. Contact her at 212.722.2240. ©THINKSTOCK Even if your business is incorporated, many landlords will require a personal guarantee as part of the lease contract. 9. Can You Sell Your Business? Landlords are wary of tenants selling their businesses while leasing space. In a worst case scenario, an owner could sell his business to a deadbeat for $1 and walk away from the lease—assuming that he didn't give a personal guarantee. Accordingly, many lease forms require the landlord to approve any sale before it is finalized. If you think you may want to sell your practice or pass it on to a partner or family member, you should focus on the assignment clause, and negotiate the right to sell to any reasonable purchaser who meets minimum financial requirements.