ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
OFFICE SPACE LEASE AGREEMENT
Template — Arbor Health Technologies Inc.
Prepared by Calderwood & Harkness LLP Matter No. 1010-00003
[Insert Effective Date]
TEMPLATE — FOR USE WITH ALL AHT CLINIC SPACE LEASES Prepared in connection with AKS/Stark Self-Assessment and Remediation Engagement ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
USAGE INSTRUCTIONS & DRAFTING NOTES
Internal Guidance — Preceding the Template Body
To: Arbor Health Technologies Inc. — Office of General Counsel and Office of Chief Compliance Officer
From: Calderwood & Harkness LLP
Re: Office Space Lease Template — AKS/Stark Compliance Remediation
This Office Space Lease Agreement template (the "Template") was prepared by Calderwood & Harkness LLP for Arbor Health Technologies Inc. ("AHT") as part of the healthcare regulatory compliance self-assessment and remediation engagement undertaken pursuant to that certain Engagement Letter dated March 14, 2023, between Calderwood & Harkness LLP and AHT (the "Engagement"). This Template is a core deliverable of the remediation workstream and is designed to provide AHT with a standardized, compliant form for all office space leasing arrangements that implicate federal or state healthcare fraud and abuse laws.
Regulatory Compliance Framework. This Template is designed to conform to the following regulatory requirements:
• The Stark Law space rental exception set forth at 42 C.F.R. § 411.357(a), which provides an exception to the prohibition on physician self-referrals for rental of office space, provided that certain enumerated conditions are met; and
• The Anti-Kickback Statute (AKS) space rental safe harbor set forth at 42 C.F.R. § 1001.952(b), which provides protection from criminal prosecution, civil penalties, and exclusion for rental payments made for the use of office space, provided that certain enumerated conditions are met.
Scope of Use. This Template should be used for all new and renewed office space lease arrangements where either the landlord or the tenant is a physician, physician group, or other source of referrals of patients for designated health services ("DHS") reimbursable by Medicare or Medicaid. This includes, without limitation, arrangements in which AHT leases space to a physician practice, arrangements in which a physician practice or physician-controlled entity leases space to AHT for clinical or administrative operations, and any other arrangement involving the rental of office space where a referral relationship exists or may reasonably develop between the parties.
Transition of Legacy Leases. All existing leases that fall within the scope described above — including, specifically, the Lakeview Medical Associates legacy leases at the following locations — should be transitioned to this Template form at the earliest permissible renewal or amendment date:
• 75 Belmont Street, Worcester, MA 01605 (current lease expiration: June 30, 2025; earliest renewal notice date: March 31, 2025)
• 310 Main Street, Suite 2A, Shrewsbury, MA 01545 (current lease expiration: December 31, 2024; earliest renewal notice date: September 30, 2024)
Transition of these legacy leases was identified as a priority remediation action item in Calderwood & Harkness's preliminary findings memorandum dated August 22, 2023, and is tracked on the AHT Compliance Remediation Action Plan maintained by the Chief Compliance Officer.
Pre-Execution Requirements. No lease using this Template should be executed without the completion of each of the following steps:
(a) Obtaining a current fair market value opinion from an independent appraiser — such as Northbridge Valuation Advisors LLC (1600 Market Street, Suite 2800, Philadelphia, PA 19103) or another qualified firm pre-approved by the Office of General Counsel — covering the specific premises to be leased, using methodologies consistent with AHT's Fair Market Value Determination Procedures;
(b) Review and approval by AHT General Counsel (currently Patricia Yamamoto) to confirm that the completed lease conforms to this Template and that all substantive terms are consistent with regulatory requirements; and
(c) Sign-off by the Chief Compliance Officer (currently Derek Huang) confirming that the arrangement has been reviewed for compliance with the Stark Law, the AKS, applicable state anti-kickback and self-referral statutes, and AHT's internal compliance policies, and that the completed Exhibit D compliance checklist has been executed and filed.
Cross-References. This Template should be read and applied in conjunction with the following AHT internal policies and procedures:
• AHT Fair Market Value Determination Procedures (Rev. September 2023)
• AHT Revised Vendor and Third-Party Arrangement Policy (Rev. October 2023)
• AHT Master Arrangement Inventory and Risk Scoring Matrix
• AHT Compliance Remediation Action Plan (maintained by CCO)
Drafting Conventions. Bracketed fields throughout the Template denoted by "[Insert ...]" indicate terms to be completed on a deal-by-deal basis. Italicized guidance notes within brackets or following specific provisions provide drafting direction and regulatory context; these notes should be removed from the final executed version of each lease. All guidance notes and this Usage Instructions section are for internal AHT use only and should not be included in any lease provided to a counterparty.
Critical Warning. Rent must be set in advance, must reflect fair market value as determined by an independent appraisal, and must not take into account the volume or value of referrals between the parties. Any departure from this principle — whether in the base rent, additional rent, operating expense pass-throughs, tenant improvement allowances, or any other economic term — may result in non-compliance with the Stark Law space rental exception and the AKS space rental safe harbor, exposing AHT to significant civil and criminal liability. Questions regarding the application of this principle to specific deal terms should be directed to Calderwood & Harkness LLP (Attention: Sarah Brennan, Partner, Healthcare Regulatory Practice, 617-555-0140).
OFFICE SPACE LEASE AGREEMENT
This Office Space Lease Agreement (this "Lease") is entered into as of [Insert Effective Date] (the "Effective Date"), by and between:
LANDLORD: [Insert full legal name of Landlord], a [Insert entity type, e.g., corporation, limited liability company, partnership, sole proprietorship] organized under the laws of [Insert jurisdiction, e.g., the Commonwealth of Massachusetts], with a principal address at [Insert address] (the "Landlord");
and
TENANT: [Insert full legal name of Tenant], a [Insert entity type, e.g., corporation, limited liability company, partnership, sole proprietorship] organized under the laws of [Insert jurisdiction, e.g., the Commonwealth of Massachusetts], with a principal address at [Insert address] (the "Tenant").
Guidance note: If AHT is the Landlord, use: "Arbor Health Technologies Inc., a Delaware corporation with its principal office at 200 Concord Avenue, Suite 400, Cambridge, MA 02138." If AHT is the Tenant, insert the counterparty as Landlord with its full legal name, entity type, jurisdiction of organization, and principal address. Verify the counterparty's legal name and good standing through the applicable Secretary of State's office prior to execution.
Landlord and Tenant are sometimes referred to herein collectively as the "Parties" and individually as a "Party."
RECITALS
WHEREAS, Landlord owns or controls the premises described herein and desires to lease certain office space to Tenant for the purposes set forth herein (the "Premises"), all on the terms and conditions set forth in this Lease;
WHEREAS, Tenant desires to lease the Premises from Landlord for the conduct of [Insert description of permitted use — e.g., the practice of internal medicine and primary care, clinical laboratory operations, medical billing and administrative functions, or other specified purpose], all on the terms and conditions set forth in this Lease;
WHEREAS, the Parties acknowledge that one or both Parties may be in a position to make or receive referrals of patients for designated health services (as defined under 42 U.S.C. § 1395nn and the regulations promulgated thereunder) or items or services reimbursable under federal healthcare programs (as defined under 42 U.S.C. § 1320a-7b), and the Parties desire to structure this Lease so as to comply with all applicable federal and state healthcare fraud and abuse laws;
WHEREAS, the Parties intend that this Lease comply with and be interpreted consistently with the Physician Self-Referral Law (42 U.S.C. § 1395nn) and the space rental exception set forth at 42 C.F.R. § 411.357(a), and the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) and the space rental safe harbor set forth at 42 C.F.R. § 1001.952(b); and
WHEREAS, the rental amount set forth herein was determined through an independent fair market value appraisal and reflects the fair market value of the leased space, without regard to the volume or value of any referrals or other business generated between the Parties.
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
As used in this Lease, the following terms shall have the meanings set forth below:
Section 1.1 "AKS" means the federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), as amended from time to time, and all regulations promulgated thereunder, including without limitation 42 C.F.R. Part 1001.
Section 1.2 "Base Rent" means the fixed periodic rental payment due from Tenant to Landlord, as set forth in Article IV and Exhibit C of this Lease.
Section 1.3 "Building" means the building in which the Premises are located, as more particularly described in Exhibit A attached hereto and incorporated herein by reference.
Section 1.4 "Common Areas" means those areas of the Building and the land on which the Building is situated that are designated by Landlord from time to time for the common use and benefit of all tenants and occupants of the Building, including without limitation lobbies, corridors, stairways, elevators, restrooms, mechanical rooms, loading areas, and parking areas, as applicable.
Section 1.5 "Commencement Date" means [Insert date], or such other date as may be determined in accordance with Section 3.1 of this Lease, on which Tenant's right to possession of the Premises and the obligation to pay Base Rent shall commence.
Section 1.6 "Designated Health Services" or "DHS" means those items and services defined as "designated health services" in 42 U.S.C. § 1395nn(h)(6) and 42 C.F.R. § 411.351, as amended from time to time, including without limitation clinical laboratory services, physical therapy services, occupational therapy services, radiology services, radiation therapy services and supplies, durable medical equipment and supplies, parenteral and enteral nutrients, equipment, and supplies, prosthetics, orthotics, and prosthetic devices and supplies, home health services, outpatient prescription drugs, and inpatient and outpatient hospital services.
Section 1.7 "Effective Date" has the meaning set forth in the Preamble of this Lease.
Section 1.8 "Expiration Date" means the date on which the Initial Term of this Lease expires, as set forth in Section 3.1 of this Lease.
Section 1.9 "Fair Market Value" or "FMV" means the value in arm's length transactions, consistent with the general market value (as that term is defined in 42 C.F.R. § 411.351), of rental property for general commercial purposes (not taking into account its intended use), in the location of the Premises, determined without regard to the volume or value of any referrals or other business generated between the Parties to this Lease. For purposes of this Lease, Fair Market Value shall be determined in accordance with the standards and methodologies set forth in the FMV Opinion and shall be consistent with the definition of "fair market value" as applied under both the Stark Law and the AKS.
Section 1.10 "FMV Opinion" means the independent fair market value appraisal report prepared by a qualified, independent appraiser in connection with this Lease, a summary of which is attached as Part 2 of Exhibit C, together with any subsequent updated appraisal obtained pursuant to Section 4.5 of this Lease.
Section 1.11 "Federal Healthcare Program" means any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government (other than the Federal Employees Health Benefits Program), including Medicare, Medicaid, TRICARE, and any other program as defined in 42 U.S.C. § 1320a-7b(f).
Section 1.12 "Landlord" has the meaning set forth in the Preamble of this Lease, together with Landlord's permitted successors and assigns.
Section 1.13 "Lease Year" means (a) with respect to the first Lease Year, the period commencing on the Commencement Date and ending on the day immediately preceding the first anniversary of the Commencement Date, and (b) with respect to each subsequent Lease Year, each consecutive twelve (12)-month period commencing on the anniversary of the Commencement Date and ending on the day immediately preceding the next anniversary thereof.
Section 1.14 "Operating Expenses" has the meaning set forth in Section 4.3 of this Lease, if applicable to the lease structure selected by the Parties (e.g., triple-net or modified gross lease).
Section 1.15 "Permitted Use" means the specific use of the Premises described in Section 5.1 of this Lease.
Section 1.16 "Premises" means the specific office space leased by Landlord to Tenant pursuant to this Lease, as more particularly described in Exhibit A attached hereto and incorporated herein by reference, including the square footage measurement and floor plan set forth therein.
Section 1.17 "Renewal Term" has the meaning set forth in Section 3.2 of this Lease.
Section 1.18 "Stark Law" means the Physician Self-Referral Law, 42 U.S.C. § 1395nn, as amended from time to time, and all regulations promulgated thereunder, including without limitation 42 C.F.R. Part 411, Subpart J.
Section 1.19 "Tenant" has the meaning set forth in the Preamble of this Lease, together with Tenant's permitted successors and assigns.
Section 1.20 "Term" means, collectively, the Initial Term (as defined in Section 3.1) and any Renewal Term(s) (as defined in Section 3.2), as applicable.
ARTICLE II — PREMISES
Section 2.1 — Leased Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises described in Exhibit A attached hereto and incorporated herein by reference. The Premises consist of approximately [Insert number] rentable square feet of office space located at [Insert full street address, suite/unit number, city, state, zip code] (the "Premises"). The exact location, configuration, and dimensions of the Premises are depicted on the floor plan attached to Exhibit A. The Premises shall be measured in accordance with the Building Owners and Managers Association International (BOMA) standard of measurement (ANSI/BOMA Z65.1-2017) or such other standard as the Parties may agree in writing.
Guidance note: The description of the Premises must be specific and must identify the exact space leased. This specificity is a requirement of the Stark Law space rental exception — under 42 C.F.R. § 411.357(a), the lease must "cover[] all of the premises leased between the parties" and must "specif[y] the premises covered by the lease." A generic description (e.g., "office space in the Building") is insufficient. Attach a floor plan clearly delineating the leased area with dimensions and suite/room numbers.
Section 2.2 — Exclusive Use. The Premises are leased to Tenant for Tenant's exclusive use during the Term. Landlord shall not grant any other party the right to use or occupy the Premises, or any portion thereof, during the Term without Tenant's prior written consent. Tenant shall have the right to use the Premises twenty-four (24) hours per day, seven (7) days per week, subject to reasonable Building rules and regulations established by Landlord from time to time and provided to Tenant in writing.
Guidance note: If the lease involves shared or non-exclusive space on a part-time basis, the exclusive use provision in this Section 2.2 should be modified and the additional provisions in Section 2.3 below must be included. Part-time or shared use arrangements are subject to heightened regulatory scrutiny under both the Stark Law and the AKS. Consult Calderwood & Harkness LLP before finalizing any part-time or shared use arrangement.
Section 2.3 — Part-Time or Shared Use Arrangements (If Applicable). [Include this Section 2.3 only if the Premises will be used by Tenant on a part-time or periodic basis rather than on a full-time exclusive basis. If the lease is for full-time exclusive use, delete this Section 2.3 in its entirety and note "Section 2.3 — Reserved" in the final executed version.]
In the event that Tenant's use of the Premises is on a part-time or periodic basis rather than full-time exclusive use, the following additional provisions shall apply:
(a) Schedule of Use. The specific schedule of Tenant's use of the Premises — including the days of the week and the hours of access on each scheduled day — shall be set forth in Exhibit B attached hereto and incorporated herein by reference. The schedule shall specify, at a minimum, the exact days, the precise start and end times for each day of use, and the total number of hours per week during which Tenant shall have the right to use and occupy the Premises.
(b) Schedule Fixed in Advance. The schedule of use set forth in Exhibit B shall be established in advance for each Lease Year and may not be modified during the applicable Lease Year except by a written amendment executed by both Parties. Any such amendment must be executed prior to the effective date of the schedule modification and must comply with all requirements of the Stark Law space rental exception and the AKS space rental safe harbor applicable to part-time or periodic use arrangements.
(c) Prorated Rent for Part-Time Use. The Base Rent for part-time use of the Premises shall be prorated based on the Fair Market Value of the Premises for the time and space actually used by Tenant, as documented in the FMV Opinion. The calculation of prorated rent shall be set forth in Exhibit C and shall reflect a proportionate share of the FMV of the Premises corresponding to the schedule of use set forth in Exhibit B.
(d) Minimum Duration. The duration of any part-time or shared use arrangement under this Lease shall be at least one (1) year, consistent with the requirements of 42 C.F.R. § 411.357(a)(2) and 42 C.F.R. § 1001.952(b).
Guidance note: Section 2.3 is required under 42 C.F.R. § 411.357(a)(2) for part-time leases. The Stark space rental exception for part-time use requires that the arrangement cover exactly the premises and schedule set forth in advance. The AKS space rental safe harbor at 42 C.F.R. § 1001.952(b)(3) similarly requires that leases for periodic use "specif[y] exactly the schedule of such intervals, their precise length, and the exact rent for such intervals." Failure to specify the schedule with precision may disqualify the arrangement from both the exception and the safe harbor.
Section 2.4 — Common Areas. In addition to the Premises, Tenant shall have the non-exclusive right, in common with Landlord and all other tenants and occupants of the Building, to use the Common Areas of the Building during the Term, subject to the reasonable rules and regulations established by Landlord from time to time. Landlord shall maintain the Common Areas in a clean, safe, and orderly condition consistent with the standards of comparable buildings in the relevant market area.
Section 2.5 — Condition of Premises. Tenant acknowledges that Tenant has inspected the Premises and accepts the Premises in their current "as-is" condition as of the Commencement Date, except for any tenant improvement work that Landlord has agreed to perform as set forth in a separate tenant improvement agreement or work letter, if any, attached hereto as an addendum. Landlord makes no representations or warranties regarding the condition, suitability, or fitness of the Premises for Tenant's intended use except as expressly set forth in this Lease.
[Insert additional tenant improvement provisions, if applicable, including description of Landlord's work, Tenant's work, tenant improvement allowance (if any), construction timeline, and related terms. Any tenant improvement allowance must be consistent with FMV and must not be structured as an inducement for referrals.]
ARTICLE III — TERM
Section 3.1 — Initial Term. The initial term of this Lease (the "Initial Term") shall commence on [Insert Commencement Date] (the "Commencement Date") and shall expire on [Insert Expiration Date] (the "Expiration Date"), unless earlier terminated in accordance with the provisions of this Lease. The Initial Term shall be no less than one (1) year from the Commencement Date.
Guidance note: A term of at least one (1) year is a mandatory requirement under both the Stark Law space rental exception (42 C.F.R. § 411.357(a)) and the AKS space rental safe harbor (42 C.F.R. § 1001.952(b)). Leases with an Initial Term of less than one (1) year do not qualify for either the exception or the safe harbor and should not be executed using this Template. If business circumstances require a term of less than one year, consult Calderwood & Harkness LLP regarding alternative structuring options and applicable risk analysis.
Section 3.2 — Renewal Term(s). This Lease may be renewed for [Insert number — e.g., two (2)] successive period(s) of [Insert duration — e.g., one (1) year] each (each a "Renewal Term"), upon written notice given by Tenant to Landlord no later than [Insert — e.g., ninety (90)] days prior to the expiration of the then-current Term (whether the Initial Term or a preceding Renewal Term). Each Renewal Term shall be subject to the following conditions:
(a) FMV Re-Determination. Renewal of this Lease is subject to a re-determination of the Base Rent at Fair Market Value as of the commencement of each Renewal Term, based on an updated FMV Opinion obtained in accordance with Section 4.5 of this Lease. The updated Base Rent for the Renewal Term shall not take into account the volume or value of any referrals or other business generated between the Parties.
(b) Written Amendment. Each Renewal Term shall be memorialized in a written amendment to this Lease (a "Renewal Amendment") setting forth the updated Base Rent for the Renewal Term, the commencement and expiration dates of the Renewal Term, and a confirmation by the Parties that the renewed arrangement continues to comply with the Stark Law space rental exception at 42 C.F.R. § 411.357(a) and the AKS space rental safe harbor at 42 C.F.R. § 1001.952(b). The Renewal Amendment shall be executed by both Parties prior to the commencement of the Renewal Term.
Section 3.3 — Holdover.
(a) Holdover on Month-to-Month Basis. If Tenant remains in possession of the Premises after the expiration of the Term (or any Renewal Term) without the execution of a new lease or a written Renewal Amendment, such holdover shall be on a month-to-month basis at the then-current Base Rent (as in effect immediately prior to the expiration of the Term), and the holdover arrangement shall otherwise be on the same terms and conditions as the immediately preceding lease arrangement. The Parties intend that any such holdover arrangement comply with the Stark Law holdover exception set forth at 42 C.F.R. § 411.357(a)(7).
(b) Holdover Conditions. During any holdover period under this Section 3.3, the following conditions shall apply:
(i) The holdover arrangement shall be on the same terms and conditions as the immediately preceding lease arrangement, without modification;
(ii) The holdover arrangement shall be month-to-month and shall be terminable by either Party upon not less than thirty (30) days' prior written notice to the other Party;
(iii) The holdover period shall not exceed six (6) months from the expiration of the immediately preceding Term, unless the Parties execute a renewed lease or Renewal Amendment in accordance with Section 3.2 prior to the expiration of such six (6)-month period; and
(iv) The rent payable during the holdover period shall continue to reflect Fair Market Value. If, at any time during the holdover period, either Party has reasonable grounds to believe that the then-current Base Rent no longer reflects Fair Market Value, that Party shall promptly notify the other Party, and the Parties shall cooperate in obtaining an updated FMV Opinion and adjusting the Base Rent accordingly.
Guidance note: Holdover provisions are critical for Stark Law compliance. The 2021 Stark Law Modernization Final Rule (85 Fed. Reg. 77492, published November 20, 2020, effective January 19, 2021) codified a holdover exception at 42 C.F.R. § 411.357(a)(7) that permits holdover arrangements under certain conditions. However, the holdover exception has specific requirements, and prolonged holdover periods without re-evaluation of FMV create compliance risk. This Section 3.3 should be reviewed and updated as regulations change. Consult Calderwood & Harkness LLP if a holdover period is anticipated to exceed six (6) months.
Section 3.4 — Early Termination.
(a) Termination for Cause. Either Party may terminate this Lease prior to the Expiration Date upon the occurrence of an Event of Default (as defined in Section 9.1) by the other Party, subject to the notice and cure provisions set forth in Article IX.
(b) Termination for Casualty or Condemnation. This Lease may be terminated in accordance with the provisions of Article XI in the event of a casualty or condemnation affecting the Premises.
(c) Prohibited Termination. Neither Party may terminate this Lease for the purpose of renegotiating rental rates to reflect changes in the volume or value of referrals of patients, laboratory specimens, diagnostic tests, or any other items or services between the Parties. Any termination motivated, in whole or in part, by such purpose shall be void and of no force or effect.
ARTICLE IV — RENT
Section 4.1 — Base Rent. Tenant shall pay to Landlord a fixed Base Rent of $[Insert amount] per [month/year] (the "Base Rent"), payable in advance on the first (1st) day of each calendar month during the Term. If the Commencement Date falls on a day other than the first day of a calendar month, the Base Rent for such partial month shall be prorated on a per diem basis based on the actual number of days in such month. The Base Rent for each Lease Year (or portion thereof) is set forth in the Rent Schedule attached as Part 1 of Exhibit C. All payments of Base Rent shall be made by Tenant to Landlord at the address specified in the Preamble (or such other address as Landlord may designate in writing), by check or electronic funds transfer, without deduction, offset, or abatement except as expressly provided in this Lease.
Guidance note: Rent must be set in advance and documented in writing. Under both the Stark Law space rental exception (42 C.F.R. § 411.357(a)) and the AKS space rental safe harbor (42 C.F.R. § 1001.952(b)), the aggregate rental charged over the term of the lease must be (i) set in advance, (ii) consistent with fair market value in arm's length transactions, and (iii) not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties. Ensure that the Base Rent specified herein and in Exhibit C meets each of these requirements.
Section 4.2 — Fair Market Value Certification. The Parties acknowledge and agree that the Base Rent set forth in this Article IV and in Exhibit C:
(a) Has been determined through an independent fair market value appraisal prepared by [Insert name of appraiser — e.g., Northbridge Valuation Advisors LLC], a qualified and independent real estate appraiser with no financial relationship with either Party that would compromise the appraiser's independence, a summary of which appraisal is attached as Part 2 of Exhibit C;
(b) Reflects the fair market value of the Premises for the Permitted Use, determined without regard to the volume or value of any referrals of patients, laboratory specimens, diagnostic tests, or other items or services, or any other business generated between the Parties or any entities affiliated with or controlled by the Parties;
(c) Is commercially reasonable even if no referrals of any kind were made between the Parties, meaning that a reasonable landlord and tenant would enter into the arrangement on the terms set forth herein in the absence of any referral relationship; and
(d) Does not exceed the fair market value of the Premises for general commercial purposes (i.e., not taking into account the intended use of the Premises for healthcare-related activities) in the relevant geographic market in which the Premises are located.
Section 4.3 — Operating Expenses / Additional Rent (If Applicable). [Include this Section 4.3 only if the lease structure is a triple-net (NNN) lease or a modified gross lease under which Tenant is responsible for a share of operating expenses, real estate taxes, insurance, and/or common area maintenance charges. If the lease is a gross lease in which Base Rent is inclusive of all operating expenses, delete this Section 4.3 and note "Section 4.3 — Reserved."]
In addition to the Base Rent, Tenant shall pay to Landlord, as additional rent ("Additional Rent"), Tenant's proportionate share of Operating Expenses for the Building. For purposes of this Section 4.3:
(a) "Operating Expenses" shall mean all reasonable and customary costs and expenses incurred by Landlord in the operation, maintenance, repair, and management of the Building and the Common Areas, including without limitation real estate taxes and assessments, property insurance premiums, utilities (to the extent not separately metered to individual tenants), common area maintenance costs, landscaping, snow removal, janitorial services for Common Areas, management fees, and capital expenditures amortized over their useful life in accordance with generally accepted accounting principles. Operating Expenses shall not include costs of tenant-specific improvements, debt service, depreciation, leasing commissions, or capital expenditures that are not reasonably allocable to the normal operation of the Building.
(b) Tenant's proportionate share of Operating Expenses shall be calculated on a pro rata square footage basis, determined by dividing the rentable square footage of the Premises by the total rentable square footage of the Building. All Additional Rent and Operating Expense pass-throughs shall be calculated on this pro rata basis and shall not vary based on, or take into account, the volume or value of referrals of patients or other business between the Parties.
(c) Landlord shall provide Tenant with an annual reconciliation statement of Operating Expenses within one hundred twenty (120) days following the end of each calendar year, comparing the estimated Operating Expenses paid by Tenant during such year to the actual Operating Expenses incurred. Any overpayment by Tenant shall be credited against the next installment(s) of Additional Rent (or refunded to Tenant if the Term has expired), and any underpayment by Tenant shall be payable to Landlord within thirty (30) days of receipt of the reconciliation statement.
(d) Tenant shall have the right to audit Landlord's books and records relating to Operating Expenses once per calendar year, at Tenant's expense, upon reasonable notice to Landlord.
Section 4.4 — Rent Escalation. The Base Rent for each Lease Year during the Term shall be as set forth in the Rent Schedule in Part 1 of Exhibit C. To the extent the Base Rent includes an annual escalation, such escalation shall be determined as follows:
(a) Fixed Escalation. The Base Rent shall increase by a fixed amount of $[Insert — e.g., a stated dollar amount] per Lease Year, or by a fixed percentage of [Insert — e.g., three percent (3%)] per Lease Year, as set forth in Exhibit C; or
(b) Index-Based Escalation. The Base Rent shall be adjusted annually based on changes in an objective, publicly available index — specifically, the Consumer Price Index — All Urban Consumers (CPI-U) published by the United States Bureau of Labor Statistics for the [Insert applicable metropolitan statistical area (MSA)] — with such adjustment calculated as follows: [Insert formula for CPI adjustment]. In no event shall such index-based escalation result in a Base Rent that exceeds the Fair Market Value of the Premises.
In either case, the rent escalation methodology (i) shall be set in advance and specified in Exhibit C, (ii) shall be based on objective criteria, and (iii) shall not be determined by reference to, or take into account, the volume or value of referrals of patients or other business between the Parties.
Guidance note: Rent escalation provisions are permissible under both the Stark space rental exception and the AKS space rental safe harbor, provided that the escalation methodology is set in advance and does not take into account referrals. The Parties should select either a fixed escalation (subsection (a)) or an index-based escalation (subsection (b)), and delete the inapplicable alternative. The selected escalation should be reflected in the Rent Schedule in Exhibit C.
Section 4.5 — Periodic FMV Re-Determination. The Base Rent shall be re-determined at Fair Market Value under the following circumstances:
(a) Renewal Term Re-Determination. At the commencement of each Renewal Term, the Base Rent shall be re-determined based on a new or updated FMV Opinion obtained from an independent, qualified appraiser. Such FMV Opinion shall be obtained no earlier than twelve (12) months prior to the commencement of the applicable Renewal Term and shall reflect the Fair Market Value of the Premises as of the commencement date of such Renewal Term. The updated Base Rent shall be set forth in the Renewal Amendment executed pursuant to Section 3.2(b).
(b) Material Modification of Premises. At any time the Premises are materially modified — including, without limitation, an expansion or reduction in the square footage of the Premises, a material change in the configuration or finish-out of the Premises, or a material change in the services or amenities included in the lease — the Base Rent shall be re-determined based on an updated FMV Opinion reflecting the Fair Market Value of the modified Premises.
(c) Extended Holdover. In connection with any holdover period under Section 3.3, if the holdover extends beyond six (6) months from the expiration of the immediately preceding Term, the Base Rent shall be re-determined based on an updated FMV Opinion obtained prior to the expiration of such six (6)-month period.
Guidance note: AHT's Fair Market Value Determination Procedures require periodic FMV refresh as described in this Section 4.5. All FMV Opinions obtained in connection with this Lease — whether at inception, renewal, or re-determination — should be retained by the Chief Compliance Officer (Derek Huang) in the compliance files for not less than ten (10) years from the date of expiration or termination of this Lease. Cross-reference AHT's Fair Market Value Determination Procedures (Rev. September 2023) for the list of approved appraisers, required documentation, and internal review processes.
Section 4.6 — No Rental Adjustments Based on Referrals. Under no circumstances shall the Base Rent, any Additional Rent, Operating Expenses, tenant improvement allowances, rent abatements, rent credits, or any other amounts payable or benefits provided under this Lease be adjusted, modified, waived, forgiven, or otherwise determined based on, or with reference to, the volume or value of referrals of patients, laboratory specimens, diagnostic tests, pharmaceutical prescriptions, or any other items or services between the Parties, between either Party and any affiliate of the other Party, or between any physicians, healthcare professionals, or other individuals or entities associated with either Party.
This prohibition applies to all forms of remuneration, whether direct or indirect, and includes, without limitation, any arrangement under which rental payments, concessions, or other economic benefits are tied to, correlated with, or otherwise reflective of patient referral volumes, diagnostic test ordering patterns, prescription volumes, or any other measure of the business generated between the Parties.
Guidance note: This is the critical anti-abuse provision ensuring compliance with both the Stark Law space rental exception and the AKS space rental safe harbor. This provision should not be modified, limited, or qualified under any circumstances. Any proposed modification should be referred to Calderwood & Harkness LLP and the AHT Chief Compliance Officer for review prior to discussion with the counterparty.
ARTICLE V — USE OF PREMISES
Section 5.1 — Permitted Use. Tenant shall use the Premises solely for [Insert description of permitted use — e.g., the practice of internal medicine and primary care; clinical laboratory operations; medical billing, coding, and administrative functions; or other specified purpose] (the "Permitted Use"). Tenant shall not use the Premises for any purpose other than the Permitted Use without the prior written consent of Landlord. Tenant shall not use or permit the use of the Premises for any unlawful purpose or in any manner that would violate any applicable federal, state, or local law, regulation, or ordinance.
Section 5.2 — Compliance with Laws. Tenant shall, at Tenant's sole cost and expense, comply with all applicable federal, state, and local laws, regulations, ordinances, rules, and orders in its use and occupancy of the Premises, including without limitation:
(a) The Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) and all regulations promulgated thereunder;
(b) The Stark Law (42 U.S.C. § 1395nn) and all regulations promulgated thereunder;
(c) Applicable state anti-kickback and self-referral laws, including, as applicable:
(i) Massachusetts General Laws Chapter 175H, Section 3;
(ii) Connecticut General Statutes Section 20-7a(d);
(iii) Applicable provisions of the Rhode Island General Laws; and
(iv) Applicable provisions of the New Hampshire Revised Statutes Annotated;
(d) All applicable professional licensure and credentialing requirements;
(e) All applicable building codes, fire codes, and zoning regulations;
(f) The Americans with Disabilities Act (42 U.S.C. § 12101 et seq.) and applicable state accessibility requirements;
(g) All applicable environmental laws and regulations; and
(h) All applicable privacy and data security laws, including the Health Insurance Portability and Accountability Act of 1996, as amended (42 U.S.C. § 1320d et seq.), and the regulations promulgated thereunder, to the extent applicable to Tenant's use of the Premises.
Section 5.3 — Restrictions on Assignment and Subletting. Tenant shall not sublease, assign, or otherwise transfer this Lease or any interest herein, or permit any other party to use or occupy the Premises or any portion thereof, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned, or delayed. Any purported assignment, sublease, or transfer made in violation of this Section 5.3 shall be void and of no force or effect. This Section 5.3 is subject to the additional provisions of Article X (Assignment and Subletting).
Section 5.4 — Signage. Tenant may install signage identifying Tenant's business on or adjacent to the entry door of the Premises and, subject to Landlord's reasonable approval as to size, design, and placement, in the Building lobby directory and on the exterior of the Building, all in compliance with applicable zoning regulations and Building rules and regulations. The cost of fabrication, installation, maintenance, and removal of Tenant's signage shall be borne by Tenant. Tenant shall remove all signage upon the expiration or termination of this Lease and shall restore the affected areas to their original condition.
Section 5.5 — Alterations and Improvements. Tenant shall not make any structural alterations, additions, or improvements to the Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned, or delayed for non-structural alterations that do not materially affect the Building's systems, structure, or exterior appearance. All alterations and improvements made by Tenant shall be performed in a good and workmanlike manner, in compliance with all applicable laws and building codes, and at Tenant's sole cost and expense. Unless otherwise agreed in writing, all alterations and improvements (other than Tenant's trade fixtures and movable equipment) shall become the property of Landlord upon the expiration or termination of this Lease.
ARTICLE VI — LANDLORD'S OBLIGATIONS
Section 6.1 — Quiet Enjoyment. Landlord covenants that Tenant, upon paying the Base Rent and Additional Rent (if applicable) and performing all of Tenant's obligations under this Lease, shall peacefully and quietly have, hold, and enjoy the Premises during the Term without hindrance, interference, or disturbance by Landlord or any party claiming by, through, or under Landlord, subject to the terms and conditions of this Lease.
Section 6.2 — Maintenance and Repairs. Landlord shall be responsible for the maintenance, repair, and replacement (as reasonably necessary) of the following elements of the Building and the Premises:
(a) The structural elements of the Building, including the foundation, exterior walls, roof, and structural columns and beams;
(b) The Building's mechanical, electrical, plumbing, and HVAC systems (to the extent such systems serve the Premises in common with other portions of the Building or are components of the base Building infrastructure);
(c) The Common Areas, including lobbies, corridors, elevators, stairways, restrooms, and parking areas;
(d) The Building's exterior, including landscaping, sidewalks, and driveways; and
(e) Compliance of the Building (excluding the Premises interior, which is Tenant's responsibility under Section 7.1) with applicable building codes, fire codes, and accessibility requirements.
Landlord shall perform all maintenance and repairs under this Section 6.2 in a timely and workmanlike manner, consistent with the standards of comparable commercial office buildings in the relevant market area. The costs of maintenance, repairs, and replacements under this Section 6.2 shall be borne by Landlord, except to the extent such costs are includable in Operating Expenses and passed through to Tenant as Additional Rent under Section 4.3 (if applicable).
Section 6.3 — Utilities and Services. Landlord shall provide, or cause to be provided, the following utilities and services to the Premises during the Term:
(a) Electricity, natural gas, and water/sewer service to the Building (Tenant shall be responsible for the cost of utilities consumed within the Premises, either through direct metering or as a component of Operating Expenses, as applicable);
(b) Heating, ventilation, and air conditioning (HVAC) service to the Premises during Building operating hours (as established by Landlord from time to time), with after-hours HVAC available upon Tenant's request at Tenant's expense;
(c) Janitorial services for the Common Areas (janitorial services for the Premises interior shall be Tenant's responsibility unless otherwise agreed); and
(d) Elevator service (if the Building is equipped with elevators), trash removal, and snow removal for the Common Areas and parking areas.
Section 6.4 — Insurance. Landlord shall maintain, at Landlord's cost and expense (subject to inclusion in Operating Expenses as Additional Rent under Section 4.3, if applicable), the following insurance coverages throughout the Term:
(a) Property insurance covering the Building (excluding Tenant's personal property, trade fixtures, and improvements) against loss or damage by fire and such other risks as are customarily insured against in the relevant market, in an amount not less than the full replacement cost of the Building;
(b) Commercial general liability insurance with coverage limits of not less than $1,000,000 per occurrence and $2,000,000 in the aggregate, covering Landlord's liability for bodily injury, personal injury, and property damage arising out of the ownership, operation, and maintenance of the Building and the Common Areas; and
(c) Such other insurance as Landlord may reasonably determine to be appropriate for the Building.
Upon Tenant's written request, Landlord shall provide Tenant with certificates of insurance evidencing the coverages described above.
ARTICLE VII — TENANT'S OBLIGATIONS
Section 7.1 — Interior Maintenance. Tenant shall be responsible for the maintenance, repair, and replacement (as reasonably necessary) of the interior of the Premises, including without limitation interior walls, ceilings, flooring, doors, interior plumbing fixtures, light fixtures, and any equipment, furnishings, or improvements installed by Tenant. Tenant shall maintain the Premises in a clean, safe, and sanitary condition at all times, consistent with the Permitted Use and in compliance with all applicable laws, regulations, and licensing requirements. Tenant shall promptly notify Landlord of any condition in the Premises that requires repair or maintenance by Landlord under Section 6.2.
Section 7.2 — Insurance. Tenant shall maintain, at Tenant's sole cost and expense, the following insurance coverages throughout the Term:
(a) Commercial General Liability Insurance with coverage limits of not less than $[Insert — e.g., 1,000,000] per occurrence and $[Insert — e.g., 2,000,000] in the aggregate, covering Tenant's liability for bodily injury, personal injury, and property damage arising out of Tenant's use and occupancy of the Premises. Such policy shall name Landlord as an additional insured.
(b) Professional Liability / Medical Malpractice Insurance (if Tenant's Permitted Use includes the practice of medicine or the provision of clinical services) with coverage limits of not less than $[Insert — e.g., 1,000,000] per occurrence and $[Insert — e.g., 3,000,000] in the aggregate.
(c) Property Insurance covering Tenant's personal property, trade fixtures, equipment, and improvements within the Premises against loss or damage by fire and such other risks as are customarily insured against, in an amount not less than the full replacement cost thereof.
(d) Workers' Compensation Insurance as required by applicable law, covering all of Tenant's employees working at the Premises.
All insurance policies maintained by Tenant under this Section 7.2 shall be issued by insurance companies rated not less than "A-VII" by A.M. Best Company. Tenant shall provide Landlord with certificates of insurance evidencing the required coverages prior to the Commencement Date and upon each renewal of such policies thereafter. Tenant shall provide Landlord with at least thirty (30) days' prior written notice of any cancellation, non-renewal, or material change in coverage.
Section 7.3 — Indemnification.
(a) Tenant's Indemnification. Tenant shall indemnify, defend, and hold harmless Landlord and Landlord's officers, directors, employees, agents, and representatives from and against any and all claims, demands, actions, causes of action, losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and court costs) arising out of or relating to (i) Tenant's use and occupancy of the Premises, (ii) any act, omission, negligence, or willful misconduct of Tenant or Tenant's employees, agents, contractors, patients, or invitees, (iii) any breach by Tenant of any representation, warranty, covenant, or obligation under this Lease, or (iv) any violation by Tenant of any applicable law, regulation, or ordinance.
(b) Landlord's Indemnification. Landlord shall indemnify, defend, and hold harmless Tenant and Tenant's officers, directors, employees, agents, and representatives from and against any and all claims, demands, actions, causes of action, losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and court costs) arising out of or relating to (i) Landlord's ownership, operation, and maintenance of the Building and the Common Areas, (ii) any act, omission, negligence, or willful misconduct of Landlord or Landlord's employees, agents, or contractors, (iii) any breach by Landlord of any representation, warranty, covenant, or obligation under this Lease, or (iv) any violation by Landlord of any applicable law, regulation, or ordinance.
(c) Survival. The indemnification obligations set forth in this Section 7.3 shall survive the expiration or termination of this Lease.
Section 7.4 — Compliance Reporting. Tenant shall promptly notify Landlord in writing of any of the following events or circumstances arising during the Term:
(a) Any investigation, audit, inquiry, subpoena, civil investigative demand, or other action by any governmental authority — including without limitation the Office of Inspector General of the United States Department of Health and Human Services ("OIG"), the Centers for Medicare & Medicaid Services ("CMS"), the United States Department of Justice ("DOJ"), any United States Attorney's Office, any state Attorney General's office, or any state Medicaid Fraud Control Unit — related to Tenant's use of the Premises, Tenant's healthcare operations conducted at the Premises, or the arrangements contemplated by this Lease;
(b) Any notice of exclusion, proposed exclusion, or debarment from any Federal Healthcare Program;
(c) Any conviction of, or plea of guilty or nolo contendere to, any criminal offense related to healthcare fraud, patient abuse, or controlled substances by Tenant or any principal, officer, director, or managing employee of Tenant; and
(d) Any material change in Tenant's licensure, certification, or accreditation status that could affect Tenant's ability to conduct the Permitted Use at the Premises.
ARTICLE VIII — HEALTHCARE REGULATORY COMPLIANCE
Section 8.1 — Stark Law Space Rental Exception Compliance. The Parties intend that this Lease satisfy all requirements of the space rental exception to the Stark Law set forth at 42 C.F.R. § 411.357(a), as amended from time to time. Without limiting the generality of the foregoing, the Parties acknowledge that the following elements are essential to qualification for such exception and are satisfied by this Lease:
(a) This Lease is set out in writing and is signed by the Parties;
(b) This Lease covers all of the premises leased between the Parties for the Term, including any part-time or shared use arrangements as described in Section 2.3 and Exhibit B, if applicable;
(c) The space leased under this Lease — the Premises — is specifically identified and described in this Lease and in Exhibit A attached hereto;
(d) The Term of this Lease is for a period of at least one (1) year, as set forth in Section 3.1;
(e) The rental charges over the Term are set in advance (as documented in Exhibit C), are consistent with Fair Market Value (as certified in Section 4.2 and documented in the FMV Opinion), and are not determined in a manner that takes into account the volume or value of any referrals or other business generated between the Parties; and
(f) This Lease would be commercially reasonable even if no referrals were made between the Parties, as the rental arrangement reflects a genuine business need of Tenant for the Premises at the Permitted Use and the rental rate reflects the FMV of the Premises for general commercial purposes in the applicable market.
Section 8.2 — AKS Space Rental Safe Harbor Compliance. The Parties intend that this Lease satisfy all requirements of the space rental safe harbor under the AKS set forth at 42 C.F.R. § 1001.952(b), as amended from time to time. Without limiting the generality of the foregoing, the Parties acknowledge that the following elements are essential to qualification for such safe harbor and are satisfied by this Lease:
(a) This Lease is set out in writing and is signed by the Parties;
(b) This Lease covers all of the premises between the Parties for the Term and specifies the premises covered by the Lease, as described in Section 2.1 and Exhibit A;
(c) If this Lease is intended to provide Tenant with access to the Premises for periodic intervals of time rather than on a full-time basis, this Lease specifies exactly the schedule of such intervals, their precise length, and the exact rent for such intervals, as set forth in Section 2.3 and Exhibits B and C;
(d) The Term of this Lease is for not less than one (1) year, as set forth in Section 3.1;
(e) The aggregate rental charge over the Term is set in advance (as documented in Exhibit C), is consistent with Fair Market Value in arm's length transactions (as certified in Section 4.2 and documented in the FMV Opinion), and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the Parties for which payment may be made in whole or in part under Medicare, Medicaid, or other Federal Healthcare Programs; and
(f) The aggregate space rented under this Lease does not exceed that which is reasonably necessary to accomplish the commercially reasonable business purpose of the rental, as determined by the Parties based on Tenant's operational requirements for the Permitted Use.
Section 8.3 — Referral Independence. Nothing in this Lease shall be construed to require, or shall serve as a condition for, Tenant (or any physician, healthcare professional, or other individual or entity associated with or employed by Tenant) to refer patients, order items or services, arrange for the provision of items or services, recommend items or services, or generate business for Landlord (or any entity affiliated with, controlled by, or under common control with Landlord), or vice versa. Each Party and its associated physicians and healthcare professionals shall retain complete professional independence and autonomy in making referral, ordering, and treatment decisions for their patients, free from any influence, requirement, or expectation arising from this Lease or the landlord-tenant relationship created hereby.
Section 8.4 — Anti-Kickback and Self-Referral Representations. Each Party represents and warrants to the other Party, as of the Effective Date and continuing throughout the Term, as follows:
(a) No part of any payment made or received under this Lease is intended as, or shall be construed as, an inducement or reward for the referral of patients, items, or services reimbursable under any Federal Healthcare Program, and no such payment constitutes remuneration within the meaning of the AKS (42 U.S.C. § 1320a-7b(b)) except as protected by the space rental safe harbor at 42 C.F.R. § 1001.952(b);
(b) Neither Party has offered, paid, solicited, or received any remuneration (in cash or in kind), directly or indirectly, overtly or covertly, in return for or to induce the referral of patients or the ordering or purchasing of any items or services reimbursable under any Federal Healthcare Program, in connection with or related to this Lease;