Most medical centres and specialist suites end up with more than one business in them: a GP practice with a visiting physiotherapist, a dental practice sharing with a hygienist, an imaging practice hosting a pathology collection point, a psychology group letting rooms by the session. Nearly all of it happens on a handshake or a one-page letter, and nearly all of it sits on top of a head lease that may not permit it at all.
Start with the head lease
Before anything else, check what your own lease says about parting with possession. Almost every commercial lease prohibits assigning, subletting, licensing or sharing occupation without the landlord’s written consent, and some prohibit it outright. Doing it anyway is a breach that can put you in default, which in a worst case means losing premises you have spent hundreds of thousands fitting out. Also check the permitted use clause: “medical consulting rooms” may not cover a physiotherapist, a pathology collection service or a pharmacy, no matter how logical the pairing is. Our guide to leasing medical premises covers the permitted use question in more detail.
Sublease, licence or service agreement?
Three structures, three different relationships.
- A sublease gives the incoming practitioner exclusive possession of defined rooms for a term. It is the strongest position for them and the least flexible for you, and it needs landlord consent. Where the sub-tenant supplies services to the public, the Retail Leases Act 2003 may apply to the sublease, bringing statutory obligations you now owe as a landlord, including a disclosure statement and a five-year minimum term.
- A licence grants permission to use rooms without exclusive possession, typically on nominated days, with the licensor retaining control. Easier to end, fewer obligations, and the usual choice for sessional arrangements. But a “licence” that in practice gives exclusive, permanent occupation of a room can be re-characterised by a tribunal as a lease, with the protections that follow. The substance governs, not the label.
- A service or facilities agreement is the model where you provide rooms plus reception, nursing, equipment and billing in return for a percentage of the practitioner’s fees. This is the structure covered in our article on room licences and service agreements, and it carries the payroll tax questions currently occupying every practice in Victoria.
What the document needs to cover
- What space, when. Named rooms or “a consulting room to be allocated”? Which days and hours? What happens if you need the room back?
- What is included. Reception, bookings, nursing, consumables, sterilisation, practice software, IT, waste disposal, cleaning, utilities. List it, because the omissions become arguments.
- Fees. Fixed rent, sessional fee or percentage of billings, and if it is a percentage, exactly what falls into the base and who wears merchant fees and bad debts.
- Term, notice and termination. Including immediate termination if registration is lost or a serious incident occurs.
- Insurance. Each practitioner must hold and evidence their own professional indemnity. Confirm your own public liability and business insurance covers the shared arrangement. Many policies assume sole occupation.
- Patient records and ownership of goodwill. Whose patients are they? Who holds the records, and what happens to them when the practitioner leaves? This is the single most common dispute.
- Restraint on departure. Reasonable in scope and duration, or it will not be enforced.
- Compliance. Accreditation obligations, infection control, and, for imaging and dental, radiation licensing, which attaches to the person or entity using the apparatus and is not transferred by letting them use your room.
The regulatory overlay people forget
Sharing premises does not share approvals. Accreditation standards apply to the practice as accredited. A radiation management licence covers the licence holder’s use of the apparatus, not a colleague’s. Medicare provider numbers are tied to a practitioner at a location. Where another practitioner will use your equipment or your location, confirm in writing which approvals cover whom, and require evidence of registration, indemnity and any licence before they start.
Practical advice
Get landlord consent in writing before the arrangement starts, even if it feels like a formality. Retrospective consent is a negotiation you conduct from a weak position. Use a licence rather than a sublease unless the practitioner genuinely needs security of tenure, and make sure the document reflects how the arrangement will really operate. And document the exit at the beginning: how much notice, what happens to shared patients, who tells them, and what the departing practitioner may take.
Empower Legal Solutions prepares subleases, room licences and service agreements for medical and allied health practices across Melbourne, with pricing disclosed before you engage us. Book a free first consultation.
Frequently asked questions
Do I need my landlord’s consent to sublet a consulting room?
Almost certainly. Standard commercial leases prohibit subletting, licensing or sharing occupation without written consent, and proceeding without it is a breach that can put the head lease at risk. Get consent in writing before the arrangement begins.
Is it better to use a licence or a sublease for a visiting practitioner?
A licence is usually preferable for sessional or shared use: it is more flexible, easier to end, and avoids granting exclusive possession. A sublease suits a practitioner who needs dedicated rooms for a fixed term. The document must match how the arrangement actually works, because a tribunal will look at the substance rather than the heading.
Who owns the patients when a visiting practitioner leaves?
It depends on what the agreement says and how the patients came to the practice, subject always to the practitioner’s professional obligations around continuity of care and to privacy law governing the records. Because it is the most common source of dispute, it should be settled in writing at the outset rather than argued afterwards.