Medical Office Space: A Legal Perspective

By: Mark S. Biskamp
Texas Real Estate Business
April 2010

Acquiring a medical office building on a hospital campus is unique compared to buying a traditional office building. The MOB is often owned by a hospital and intertwined with the property through above-ground walkways, shared parking, utilities, equipment and other systems. These systems create challenges when the ownership is separated. The purchaser usually acquires the medical office building by way of a ground lease from the hospital of the land around and below the building and a deed from the hospital of the improvements in fee.

Buyers must negotiate the traditional aspects of a purchase and sale agreement, while also negotiating a ground lease and other ancillary documents addressing the separation of unified medical facilities. The hospital also will likely house a few operations in the building, so negotiations will be with the hospital as the seller, ground lessor and tenant.

The Ground Lease
The hospital typically ground leases the property, so that the hospital can maintain a level of control over the building. They also typically require office tenants to be either members of the medical profession or tenants that provide auxiliary or incidental services. The ground lease also will typically prohibit uses that are competitive with the hospital, such as magnetic resonance imaging, computed tomography, nuclear medicine or any procedure requiring anesthesia that must be administered by an anesthesiologist. If the hospital has a particular religious affiliation, the hospital may additionally prohibit uses that violate certain ethical and religious directives.

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