8. Commitments and Contingencies

Commitments

On September 28, 2016, we entered into definitive agreements to acquire an acute care hospital in Washington for a purchase price of $17.5 million. Upon closing, the facility will be leased to RCCH, pursuant to the current master lease. Closing of this transaction, which is now expected to be completed in the first half of 2018 is subject to customary real estate, regulatory and other closing conditions.

Operating leases, in which we are the lessee, primarily consist of ground leases on which certain of our facilities or other related property reside along with corporate office and equipment leases. The ground leases are long-term leases (almost all having terms of 30 years or more), some of which contain escalation provisions and one contains a purchase option. Properties subject to these ground leases are subleased to our tenants. Lease and rental expense (which is recorded on the straight-line method) for 2017, 2016, and 2015 was $9.8 million, $6.8 million, and $4.6 million, respectively, which was offset by sublease rental income of $6.6 million, $4.2 million, and $2.3 million for 2017, 2016, and 2015, respectively.

Fixed minimum payments due under operating leases with non-cancelable terms of more than one year and amounts to be received in the future from non-cancelable subleases at December 31, 2017 are as follows: (amounts in thousands)


	Fixed minimum payments		Amounts to be received from subleases			Net payments
2018	$	8,210	$	(4,386	)	$	3,824
2019		8,753		(3,946	)		4,807
2020		8,967		(4,097	)		4,870
2021		8,063		(4,175	)		3,888
2022		8,121		(4,118	)		4,003
Thereafter		191,457		(96,028	)		95,429	(1)

	$	233,571	$	(116,750	)	$	116,821

(1)

Reflects certain ground leases, in which we are the lessee, that have longer fixed terms than our existing sublease to our tenants. However, we would expect to either renew the related sublease, enter into a lease with a new tenant or early terminate the ground lease to reduce or avoid any significant impact from such ground leases.

Contingencies

We are a party to various legal proceedings incidental to our business. In the opinion of management, after consultation with legal counsel, the ultimate liability, if any, with respect to these proceedings is not presently expected to materially affect our financial position, results of operations or cash flows.