Signing a bad lease can put you in a costly and vulnerable position as a dental tenant.
An important task that every dentist should complete in preparation of a dental office lease negotiation with their landlord is a comprehensive needs analysis.
The needs analysis should outline the big picture, your current situation, and short and long term career goals. In turn, you will be in a better position to negotiate a lease that supports your plans, and protects your family and estate from ﬁnancial and legal risks down the line.
Items to Consider in Your Needs Analysis:
What Stage are You Currently at in Your Career?
Your age and phase of career should determine the details you need in your dental office lease. For example, if you are in the early stages of your career, perhaps an associate or new graduate looking to start or open your first practice, “fixturing” language will be highly relevant to you. If your new office is an empty shell, you’ll need the appropriate time to build-out your practice without incurring rental costs.
What about a tenant improvement allowance? Often landlords provide funds or an “allowance” to tenants to help offset expensive build-out costs.
What Type of Dentistry Will You Practice?
You practice General Dentistry, but what if you decide later in your career to expand your services to offer patients endodontics, orthodontics or other forms of dentistry? You’ll want to ensure your lease will permit you to do so in its “Use” provision. List out in detail all of the specific types of dentistry you foresee yourself offering to clients to ensure you’ve covered all of your bases.
Protecting your “market” is another item to consider. Having an “exclusivity” clause present in the lease will prevent your landlord from moving competing dentists into the center.
What are Your Future Plans for Growth?
The business of dentistry has enormous growth potential, and bringing in associates is a great way to compete, expand, grow production and improve your work/life balance. It’s important, however, to ensure that your lease supports these plans with the proper “associate” language that will permit you to do so.
Will You Sell Your Practice in 5-10 Years?
If you’re a mid-to-late-career dentist and plan to sell or retire in the next 5-10 years, your lease should contain language that will facilitate a smooth and profitable exit out of dentistry.
Many dentists rely on the proceeds of their dental practice sale as a retirement cushion, however, the “assignment” clause in the lease is often written in favor of the landlord giving them the right to collect your practice sale proceeds or the ability to deny your request altogether and terminate your lease.
A well-structured “assignment” clause will protect you and enable the sale of your practice at maximum value, keeping the proceeds in your pocket instead of your landlord’s.
Wealth and Estate Protection
As we enter into the later stages of our career, the issue of declining health is a common concern. Setting up the lease with a “death and disability” clause will protect your family and estate from inheriting debt and other financial obligations to the landlord in the event of death or disability.
The above are only a few of the many items that should be identified in your needs analysis before you start the dental office lease negotiation process. By being acutely aware of your needs in advance, you will be much closer to securing a valuable lease that supports and protects the future success of your practice.
Professional Office Lease Negotiation Services
Cirrus Consulting Group specializes in commercial tenant representation and dental office lease negotiations for dentists. For 20 years, we’ve helped dentists across North America reduce risks and achieve favorable terms and rental rates in their dental office leases through lease review services and dental office lease negotiations.