Healthcare Real Estate
Bay Legal, PC advises physicians, dental and medical groups, med spas, behavioral health and clinic operators, healthcare investors, and management services organizations on the real estate side of California healthcare — where commercial property law runs straight into the regulatory framework that governs how care is delivered. A medical office lease is not a standard commercial lease. A clinic sale-leaseback is not a standard sale-leaseback. The difference is the layer of federal and California law that sits on top of the real estate, and that layer is where deals get structured correctly or quietly create exposure.
We handle the legal and structural side of healthcare property: lease negotiation and drafting, purchase and sale transactions, sale-leasebacks, co-investment and ownership structuring, facility-construction and build-out compliance, and the SB 351, AB 1415/OHCA, Stark, Anti-Kickback, HCAI, ADA, and CMIA questions that ordinary real estate counsel rarely sees coming. We coordinate with the client’s broker, lender, CPA, and architect — we are the legal and regulatory layer, not a substitute for those advisors.
Why Healthcare Real Estate Is Different in California
Three frameworks turn an ordinary property matter into a healthcare matter.
First, the Corporate Practice of Medicine (CPOM) doctrine governs who may own the practice — but it does not govern who may own the real estate. A medical office building can be owned by a non-physician, an LLC, an MSO, or an investor; the clinical practice that occupies it cannot. Structuring the relationship between the property-owning entity and the physician-owned professional corporation — the lease between them, the ownership of each — is the central design problem, and getting it wrong can convert a routine arrangement into a CPOM or fee-splitting question.
Second, federal self-referral and kickback law reaches any lease or property arrangement between a referring physician and an entity that bills Medicare or Medicaid. The Stark Law’s Space Rental Exception and the Anti-Kickback Statute’s Office Space Rental Safe Harbor impose requirements — written lease, fair market value rent set without regard to referral volume, a term of at least one year, space no greater than reasonably needed — that have no equivalent in ordinary commercial leasing. The two regimes overlap but are not identical, and an arrangement can satisfy one while violating the other.
Third, California layers its own regulation on top of the federal baseline. SB 351 and AB 1415 (both effective January 1, 2026) reach into healthcare real estate transactions involving private equity and hedge funds. HCAI (formerly OSHPD) governs the construction and seismic standards for hospitals and certain clinics. The Confidentiality of Medical Information Act imposes patient-record obligations that affect landlord access and building systems. And California’s ADA enforcement environment, amplified by the Unruh Civil Rights Act, makes accessibility a live financial risk for any medical tenant or owner.
How We Help
Medical office leasing. We negotiate and draft leases for healthcare tenants and, where engaged on the other side, for landlords leasing to medical practices. This includes the clauses standard commercial templates omit — licensing and permit contingencies, patient-record and HIPAA/CMIA access restrictions, clinical build-out and systems requirements, regulatory-change termination triggers, and assignment provisions that anticipate a future practice sale or MSO restructuring — and the Stark/AKS fair-market-value framing that any referral-adjacent lease requires.
Purchase, sale, and sale-leaseback transactions. We structure acquisitions and dispositions of medical office buildings and clinical facilities, including physician sale-leasebacks, with attention to the regulatory review that now attaches to many of these deals. We coordinate the Stark/AKS analysis of any resulting lease, the SB 351 review of transaction documents, and the AB 1415/OHCA pre-transaction notice question that can independently apply to a healthcare real estate sale-leaseback.
Ownership and co-investment structuring. We design the entity architecture for physician groups that want to own the building their practice occupies — separating the real-property entity from the professional corporation, setting an arm’s-length fair-market-value lease, and structuring multi-owner arrangements without creating impermissible referral incentives. We coordinate this structuring with the financing, including owner-occupied SBA 504 and 7(a) loans and their occupancy rules.
Facility construction and build-out. We address the HCAI/OSHPD construction and seismic requirements that apply to hospitals and certain clinics, the contingencies those requirements demand in a purchase or construction contract, and the healthcare-specific terms a clinical build-out contract needs.
Compliance and diligence. We conduct and coordinate the regulatory diligence unique to clinical real estate — ADA/Unruh exposure, environmental and medical-waste liability, zoning and use-permit classification, CMIA-driven privacy obligations, and the title, lien, and permit history that runs with a healthcare facility.
Who We Work With
Physicians and physician groups; dental and specialty practices; med spas, aesthetic, and behavioral-health operators; ambulatory surgery centers and high-regulation facilities; clinic founders and multi-location operators; healthcare investors and physician co-investment groups; and management services organizations structuring the real estate side of a platform. We represent both tenants and landlords, and both buyers and sellers, depending on the engagement.
What This Practice Does Not Cover
Bay Legal designs the legal and structural foundation of healthcare real estate. We do not provide brokerage services, property appraisal, construction management, or tax-return preparation, and we do not handle malpractice defense, licensing-board defense, or construction-defect litigation. Where a matter calls for a broker, appraiser, contractor, or CPA, we coordinate with the client’s chosen advisors rather than replacing them. Tax questions — depreciation, §1031 exchange mechanics, transfer tax, and the like — are referred to or coordinated with a qualified tax advisor.
Frequently Asked Questions
Can a non-physician own the building my medical practice operates in?
Yes. California’s Corporate Practice of Medicine doctrine restricts who may own the clinical practice — generally only licensed physicians or a properly formed professional medical corporation — but it does not restrict ownership of the real estate. A non-physician, an LLC, an MSO, or an outside investor can own a medical office building. The legal work is in structuring the relationship between the property-owning entity and the practice that occupies it, including a lease set at fair market value, so the arrangement does not drift into prohibited control or referral-tied compensation.
Why can’t I just use a standard commercial lease for my medical office?
A standard commercial lease omits the terms a healthcare tenancy needs and can create regulatory exposure. Medical practices face licensing contingencies, patient-record confidentiality obligations under HIPAA and California’s stricter CMIA, clinical systems and build-out requirements, and — for any practice that bills Medicare or Medicaid and has a referral relationship with the landlord — Stark Law and Anti-Kickback Statute requirements that dictate how rent is set and documented. A lease that ignores these can be unenforceable in part, non-compliant, or both.
How do SB 351 and AB 1415 affect a healthcare real estate deal?
SB 351 (effective January 1, 2026) voids non-compete and non-disparagement clauses in contracts — including the sale of real estate or other assets — between private equity groups or hedge funds and physician or dental practices, with narrow carve-outs. AB 1415 (effective January 1, 2026) added private equity groups, hedge funds, MSOs, and certain other “noticing entities” to the Office of Health Care Affordability pre-transaction notice regime, generally requiring at least 90 days’ advance notice of a covered material change transaction. As of this writing, OHCA has proposed regulations that would expressly treat certain healthcare real estate sale-leasebacks as covered transactions. Deal timelines and documents need to account for both laws, and the regulatory picture is still developing — confirm current status before relying on any specific threshold or deadline.
Are sale-leasebacks still workable for California physicians?
Often, yes — a sale-leaseback can let a practice owner convert owned real estate into capital while keeping long-term occupancy. But in California these transactions carry a regulatory overlay: any resulting lease that involves a referring physician and a Medicare/Medicaid biller needs a fair-market-value analysis under Stark and the Anti-Kickback Statute; an SB 351 review applies if a private equity group or hedge fund is involved; and an AB 1415/OHCA notice obligation may apply. Whether a particular transaction triggers each of these is fact-specific.
Does my medical office have to comply with the ADA, and what is the California exposure?
Private medical offices are “places of public accommodation” under ADA Title III, so accessibility obligations apply to physical space, parking, paths of travel, and — a frequent enforcement focus — accessible medical equipment. In California, the exposure is amplified: the Unruh Civil Rights Act treats an ADA violation as a state-law violation carrying statutory damages (commonly cited at $4,000 per violation) plus attorney’s fees, which is what drives the state’s high volume of private accessibility suits. Allocating ADA responsibility between landlord and tenant in the lease, and building a defensible compliance record, both matter. Specific figures change and should be confirmed.
Disclaimer
This page is for general information and is not legal, tax, or financial advice. No attorney-client relationship is formed by reading this page or by contacting the firm; an engagement begins only by a signed agreement. This page addresses California law; healthcare real estate rules vary by jurisdiction. The law and the figures cited may change after the date of writing.