Is your dental office lease approaching its renewal deadline or expiry date?

Renewing the Dental Office LeaseBefore you groan at the thought of an office lease negotiation with your landlord, consider this as an opportunity that can place you in control of your continued success.

Specifically, you’ll want to look at the fine print of the “Option to Extend” or “Renew” provision in your dental office lease. These renewal “options” give you as the tenant the right to continue leasing your space for an extended period of time. The good news is that the option – if written properly – can protect you and provide you with the flexibility to stay, even if the landlord has other plans for the space at the end of your term (sorry accounting firm – this spot is taken!). More importantly, options may provide leverage in a renewal negotiation with your landlord.

However, as always, the devil is in the details, and there are a number of particulars to be aware of in your options to renew to make sure they are working for your practice, not against it.

Ask and You Shall Receive

When negotiating or renegotiating a dental office lease, remember that it is just that – a negotiation. Landlords aim to have you sign their “standard form lease” that is almost always written in their financial favor, putting you, the tenant, at risk. But remember, the details in your lease are not set in stone, and almost everything is negotiable.

  • Default: The terms of your lease may state that you cannot be in default at the time you want to exercise the option to extend. This might not sound unreasonable, but in reality, mistakes happen all the time, especially over the course of a lease of ten years or more. Maybe you submitted rent a day or two late, or perhaps you stayed open outside of your typical hours of operation as outlined in your lease to accommodate a patient. Those scenarios are seemingly harmless, but could mean you were in default of your lease all the same. Whatever the case may be, this type of slip-up should not prevent you from exercising the option to extend your lease.
  • Flexibility: Selling your dental practice may not even be on your radar right now – or perhaps it’s the primary focus of all of your current plans. Whatever your situation, you need to make sure that the office lease and the options are as attractive to you as they are to a potential buyer. Are the options in your lease written to permit new owners to exercise them? If the options are worded to pertain only to you individually, it may reduce the value of your practice and attractiveness to potential buyers down the road, or around the corner.
  • Rental Rates & Timing: There are many critical dates in the lease with a time-sensitive window of opportunity; this includes your option to renew deadline. You don’t want a negotiation over rent to become a standoff that leads to the option becoming null and void. If the rent has not been pre-determined, you’ll want to have a stipulation within the options language stating that if you and the landlord cannot agree to rental terms in the renewal negotiation, there is a next step outlined in resolution. This could be arbitration, but the key is that you don’t want this to become a loophole where the landlord can get out of the option, and leave you without a home for your practice. Ensure you are tracking the expiry date on the options, giving yourself ample time to review.

That’s a Wrap

Once you’ve done your homework, reviewed your options, and understood how they affect the flexibility of your practice, you can better negotiate favourable terms in your renewal negotiation. It’s a comfort for those in all stages of their dental career to know that some vague wording is not going to hurt your chances of selling your practice and embarking on your next adventure.

You’re in the driver’s seat with the option to extend, so review the terms, negotiate as necessary to make them work to your advantage, and steer clear of obstacles on your way to the winner’s circle.

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