Medical Office Building Litigation & Emerging Issues
Health-system consolidation, growing regulatory scrutiny of healthcare REITs, and tightening physician-group margins are converging on the medical office building lease — a high-value, comparatively underlitigated niche.
What's driving disputes right now
Grounded in current market and legal reporting, not speculation — each item links to its source.
State Legislative Scrutiny of Healthcare REITs
Connecticut became the first state to enact legislation specifically addressing hospital sale-leaseback transactions and private-equity control of healthcare facilities in 2026, with several other states introducing similar bills.
Why it matters: If more states follow, it could reshape how the REIT industry does business with healthcare providers — reducing access to capital and increasing the cost of capital used to deliver care.
Stark Law / Fair-Market-Value Lease Compliance Risk
A common fact pattern: a hospital system secures favorable lease terms for a surgical-center expansion, only to discover years later — through an audit — that the arrangement fails Stark Law fair-market-value requirements, triggering penalties and strained physician relationships.
Health-System Financial Distress Flowing Into Leases
After Steward Health Care's May 2024 Chapter 11 filing, Steward sued its landlord Medical Properties Trust in bankruptcy court, alleging MPT was blocking a 31-hospital sale process to protect its own recovery under a 2016 sale-leaseback. A global settlement terminated the master lease and released claims on 23 MPT properties, but a reserve tied to leftover Steward obligations still sat around $15 million as of mid-2026.
Why it matters: Sale-leaseback structures common to hospital real estate can turn the landlord into an active party in a tenant's bankruptcy, with litigation risk and financial overhang persisting for years after the initial default.
Standard MOB Lease Flashpoints
As physician-group margins tighten, rent escalations, tenant-improvement allowances, CAM-charge audits, exclusivity and assignment rights, and renewal options are all seeing more dispute activity than in a typical office lease.
Certificate-of-Need Constitutional Challenges
A New Bern, NC ophthalmologist's constitutional challenge to the state's certificate-of-need law (which blocked him from adding operating-room space) reached the state supreme court before a three-judge panel unanimously rejected it in December 2025, holding CON serves legitimate public-health interests. An appeal, potentially back to the state supreme court, is expected.
Why it matters: CON laws directly gate where and whether new medical facility real estate — surgical centers, imaging, outpatient space — can be built or expanded; a successful challenge in any state could reshape site-selection and competitive dynamics nationally.
Behavioral-Health Facility Siting Fights
Neighboring property owners sued to challenge an Oregon fast-track siting law for behavioral-health facilities as unconstitutional, while in Lexington, KY, neighbors filed separate court appeals of a local board's approval of a mental-health/substance-use clinic, arguing the approval was arbitrary and violated zoning distance-buffer rules.
Why it matters: Behavioral-health real estate is one of the fastest-growing healthcare CRE subtypes, but neighbor opposition is increasingly attacking both individual permits and the state siting laws meant to fast-track them.
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