Physicians are sharing office space in an effort to reduce costs associated with owning a practice. If you plan to sublease part of your office space, you need to know the legalities associated with this business model.
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First, verify whether subleasing space is permissible in your original lease agreement. Once you know it is permissible, the next step is to create a sublease agreement with office-specific guidelines like access to space, the use of staff, office hours, etc., to protect your financial and personal assets.
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The agreement should clearly define the length of the term and services to be provided by the tenant(s), as well as a clause for early termination of the contract. Another important step is to have an attorney review and notarize the sublease agreement. Without a properly executed sublease agreement, your arrangement can be viewed as a general partnership, making you liable for any debts or lawsuits generated by your tenant. To further reduce the risks associated with sharing your office space, clearly differentiate your practice by using separate office forms, phone greetings, voicemails, and billing statements. See this month’s Practice Pearls, below, for additional tips to avoid cobranding your practice.
Sometimes sharing office space allows you to share employees and the costs associated with salary and benefits—but employee sharing has its risks, too. According to an article by Rush S. Smith, JD, and John W. Miller, “In most court cases, plaintiff attorneys typically ask employees who they work for while performing different functions and the main physician employer in these situations becomes responsible for the actions of the employees, even those he or she does not supervise.”1 They go on to recommend liability coverage on shared employees to protect you against employee negligence. This type of insurance can be acquired through your practice’s professional liability policy.
Sharing office space is a viable option for physicians wishing to reduce expenses; however, taking the proper steps to protect your assets, patients, and livelihood is imperative. As a landlord, you are responsible for understanding the legal implications of subleasing space and taking the proper measures to eliminate liability.
For questions or additional information on practice management issues, contact Cindy Gutierrez, senior specialist, insurance and practice management at firstname.lastname@example.org or (404) 633-3777, ext. 310.