Radiology and diagnostic imaging tenancies are the most demanding medical leases there are. The equipment is heavy, expensive and sometimes radioactive; the premises need structural, electrical and shielding work that cannot be undone cheaply; and the regulatory approvals attach to the site, not just the practice. A lease drafted for a consulting suite will not protect an imaging practice. Here is what to negotiate before you commit.
Start with the building, not the lease
Before the commercial terms matter at all, the premises have to be physically capable of housing the equipment. The questions to put to the landlord in writing, and to have your equipment supplier and an engineer confirm:
- Floor loading. An MRI magnet, a CT gantry or a fluoroscopy unit imposes point loads that many suspended slabs cannot carry. Get the structural engineer’s certificate before you sign, not after the lease starts.
- Access and delivery path. A magnet arrives in one piece. Door widths, corridor turns, lift capacity, ceiling heights and whether a wall or window must be removed and reinstated all need to be resolved and, if reinstatement is required, allocated in the lease.
- Power supply. Three-phase capacity, dedicated circuits, the switchboard’s spare capacity and whether an upgrade to the base building is needed — and at whose cost.
- Cooling and plant. Imaging equipment generates heat and often needs dedicated chillers or condensers. Where will the plant sit, is there roof or external space, and does the landlord consent to the penetrations and the noise?
- Cryogen venting. An MRI needs a quench pipe to open air. In a multi-storey or mixed-use building this can be the single issue that makes premises unusable.
- Shielding. Lead-lined walls and doors for X-ray and CT, RF shielding for MRI. This is permanent construction that materially changes the premises.
Radiation regulation attaches to the premises
In Victoria, the use and storage of radiation apparatus is regulated under the Radiation Act 2005 and administered by the Department of Health. A management licence is held by the person or entity that uses or has custody of the apparatus, and the premises must meet the relevant design and shielding requirements — typically demonstrated through a radiation shielding assessment by a qualified expert. Two consequences for the lease: the premises need to be capable of approval before you commit, and if the landlord later insists on works that compromise shielding, you have a compliance problem as well as a commercial one. Make the lease conditional on the shielding assessment and any approvals you still need, and give yourself a right to terminate without penalty if they cannot be obtained.
Planning permits and parking
Diagnostic imaging is generally a “medical centre” use under Victorian planning schemes, and in many zones that requires a planning permit with conditions on hours, practitioner numbers, signage and car parking. Imaging practices generate high patient turnover, so the parking requirement can be significant and is a common reason permits are refused or conditioned. Confirm the existing permit covers your use at your intended scale, and if a new or amended permit is needed, make the lease conditional on obtaining it.
Term: match it to the equipment, not the rent
A fit-out with shielding and structural work, plus the equipment itself, is a seven-figure commitment amortised over many years. A five-year term with a five-year option is the minimum that makes sense; ten plus five or ten plus ten is common for imaging. Where the Retail Leases Act 2003 applies — and it often does, because imaging practices supply services to the public — you have a statutory five-year minimum including options, but that is a floor, not a target.
Make good: the clause that can cost as much as the fit-out
This is where imaging tenants are most exposed. A standard make-good clause requires the premises to be returned to their original condition. For an imaging practice that can mean removing lead-lined walls, filling structural penetrations, reinstating the slab, removing the quench pipe and plant, and disposing of shielding material — potentially hundreds of thousands of dollars at the end of a lease, payable at the worst possible moment. Negotiate one of three positions, in order of preference: no obligation to remove the fit-out (it has value to the next medical tenant); a capped make-good sum agreed now; or a defined scope tied to a dated photographic condition report taken at handover. Never leave it as “reinstate to the landlord’s reasonable satisfaction”.
Assignment, and the day you sell
Imaging practices are bought and sold, and the lease is usually the most valuable asset in the sale. Confirm that assignment to a purchaser of the practice is permitted with consent not unreasonably withheld, that the landlord’s costs are capped, and that the outgoing directors’ personal guarantees are released on assignment. Also seek a clause allowing changes in the shareholding of the tenant entity without triggering an assignment, since ownership of a practice frequently changes over a fifteen-year lease.
Exclusivity and co-location
If you are taking space in a medical centre or a building with other health tenants, ask whether the landlord will agree not to lease to a competing imaging provider. Conversely, check whether you are permitted to sublicense rooms to a visiting specialist or a pathology collection service — many imaging practices want to, and a narrow permitted use clause will stop you.
Relocation and redevelopment clauses
For a practice with immovable equipment, a landlord’s right to relocate you or terminate for redevelopment is close to an existential risk. Compensation provisions under a retail lease will not come near the cost of decommissioning and reinstalling imaging equipment. Push hard to have these clauses removed, or at minimum to have compensation defined by reference to the actual cost of relocating the equipment and the fit-out.
Empower Legal Solutions advises imaging, medical and allied health practices on leases and premises across Melbourne, with pricing disclosed before you engage us. Book a free first consultation, or read our broader guide to leasing medical premises in Victoria and our article on room licences and service agreements.
Frequently asked questions
Does the Retail Leases Act apply to a radiology practice?
Usually yes. A practice that supplies diagnostic services to members of the public from the premises generally falls within the Retail Leases Act 2003, unless an exception applies — most relevantly where annual occupancy costs exceed the statutory threshold, which larger imaging tenancies can. It is worth establishing the position before negotiating, because the Act affects outgoings, term and rent review.
Who pays for the structural and electrical upgrades an imaging fit-out needs?
It is negotiable and it should be settled in the lease, not assumed. Base building works — slab strengthening, switchboard capacity, risers, roof plant space — are often argued to be the landlord’s responsibility because they improve the building permanently. Tenant-specific works such as shielding and equipment installation are usually the tenant’s. Get the split in writing with a works schedule attached.
Can I be required to remove lead shielding at the end of the lease?
If the make-good clause says so, yes — and it is expensive. Negotiate before signing for the right to leave the fit-out in place, or for a capped payment instead of works. A medical fit-out has real value to the next healthcare tenant, which is a reasonable argument to put to the landlord.