Dental Office Lease Contract

Is your dental office lease set up for long term estate and wealth protection?

As you progress in your career, it’s important to anticipate the unexpected and be prepared well in advance. Take preventive measures to negotiate protection language into your office lease before you sign it to give you the assurance and peace of mind that your loved ones and wealth will be protected.

Death and Disability Protection in the Lease

With age comes the natural likelihood of declining health. If you are no longer able to work due to disability, who will pay off your debts and monthly rent obligations? The last thing you’ll want to have to worry about in this situation is any financial burden to your family. Simply put, including a death and disability clause in the office  lease provides you or your estate with options. Upon passing or disability, you (or the estate) could terminate the office lease altogether, avoiding unnecessary financial obligations.

Protection Afforded by the Death and Disability Clause

  • Early Termination Rights: This gives a dentist (or their estate or family) the option to terminate the lease before its expiry date if the doctor is unable to work. Often the landlord will insist on charging an “early termination fee” when this right is exercised. Not ideal, however this is still a better option than the alternative which is paying out the rent and other rent obligations (i.e. operating costs) for the remainder of the term. Total rent multiplied by the number of months remaining on the lease can easily add up to hundreds of thousands of dollars.
  • Dental Practice Assignment: This option gives you or your family the right to sell the practice and transfer the lease to another tenant in the event you are unable to work.

Personal Guarantees on the Dental Office Lease

Is the lease signed by you personally or your incorporated entity? When the lease is signed in the dentist’s name, personal guarantees could keep you or your estate on the hook financially, long after assigning the lease to a new tenant. In addition, depending on the guarantee provisions, the lease could state that if the tenant who takes over the lease defaults, the landlord can come after the original tenant (you), for what is owed for the remainder of the term (continued liability). This is not an ideal scenario to put yourself or your family through in event you sell the practice or have transferred the lease due to death or disability.

Negotiating Personal Guarantees

Ideally you want to negotiate personal guarantees out of the lease, exposing you to the least amount of personal risk as possible. Try and improve the language to state that when the lease is transferred to another tenant, the original tenant is no longer financially responsible for the lease.

If you are unable to remove this language, try and improve it by attaching a time limit to the guarantee. For instance, maybe the language can be amended to state that you will only be responsible for rent for a maximum of one year after the lease is assigned

Taking Preventive Measures

Negotiating the details in your dental office lease requires tenacity, a keen eye for planning, and a thorough review of your personal and practice goals. Before you sign the lease, remember to review it first to ensure it provides ample death and disability protection that will combat the unexpected and prevent you and your family or estate from assuming any practice debt that may arise. After all, you can’t put a price on peace of mind.

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