Searching for the perfect dental practice location can often be a daunting and frustrating ordeal for a dentist; however the search is only the tip of the iceberg.

Although a real estate broker can help you find a great location, they may not be equipped with the technical knowledge and experience necessary to negotiate a strong dental office lease on your behalf. Finding the ideal location is always exciting, but before you break out the bubbly and sign your name on the dotted line, it’s important to conduct a thorough review of the details in the dental office lease.

Why is the dental office lease so important?

The standard dental office lease is typically a 50-70 page document that outlines the tenant and landlord’s obligations to one another for the duration of the lease term. This contract is one of the most important and expensive contracts you will ever sign as a dentist, engineered by landlords to maximize the value of their properties.

Having spent over 20 years representing dentists in office lease negotiations, we have experienced many unfortunate instances where landlords become roadblocks to bringing in associates, prevent practice sales, and expansions. A strong lease can set you up for a long and profitable career by offering security and protection, while a bad lease can give your landlord lease termination rights, relocation privileges, or worse. In reality, the office lease negotiation process, including reviewing the terms within, is the most critical part of opening a practice, but is often overlooked.

What does a broker do?

The majority of real estate broker services include space-finding for both buyers and sellers, reviewing offer forms, sale contracts, and providing advice throughout the buying or selling process.

There is no cost to a dentist for brokerage services; brokers are typically remunerated for their services by the landlord based on rental rates, amount of square feet taken, and lease term. As a result, brokers typically focus on the economic terms of the lease. These are typically outlined on the first page or two of the 50-70 page lease agreement; or, the Offer to Lease.

You may be asking yourself; what about the rest of the lease agreement?

Retaining the best representation: using professional dental office lease negotiators

We often receive dental client referrals from our real estate brokerage partners for office lease negotiation and review services. When it comes to deciphering the complex language in your office lease, they understand it’s important to seek the help of professional lease negotiators as there is little room for making mistakes. A skilled negotiator can pinpoint dental-specific, hard-to-spot risks hidden in the lease, such as the relocation or demolition clause, and devise an appropriate lease negotiation strategy to improve such terms and clauses in order to set you up for success before it’s too late.

How are attorneys different from dental office lease negotiators?

Sometimes a practice broker will refer their dental clients to an attorney to review and negotiate the terms of the lease. The downside to this referral is that they often lack the experience required to read and negotiate a dental office lease. A dental tenant has very different needs than that of an accountant or retail tenant. A dental office lease must be structured in a way that protects the unique needs of a dental tenant who will typically spend 20 years or more in the space, and invest hundreds of thousands of dollars in leaseholds and other build-out costs; there is more at stake and more to lose.

Handing off the negotiation to someone without experience in dental office leases is like letting a massage therapist perform a root canal; just because they work in healthcare doesn’t mean they are qualified to perform such a procedure. It’s recommended to investigate how many dental office leases a lawyer has negotiated prior to retaining them.

Here are some examples of critical clauses in a dental office lease that should not be overlooked:

• The Relocation Clause: An unexpected practice relocation can be devastating to a dental practice for multiple reasons. Many “relocation clauses” allow the landlord to uproot the practice with 30 days’ notice. To make matters worse, often all costs associated with the move, including the demolition of the current space and the renovation and build-out costs in the new location, are the doctor’s (current tenant’s) responsibility. An unexpected relocation can easily cost a doctor hundreds of thousands of dollars.
• Death and Disability Protection: In the event of a death or an accident that prevents you from working, are you and your family protected? Can you (or the estate) terminate the lease, or will your landlord continue to charge you and your family rent until the end of your lease term? A “death and disability clause” in the lease can protect your family and estate from carrying the burden of your debt in this situation.
• Assignment Language: Can your landlord terminate your lease and kick you out of the premises just for inquiring? Can they collect proceeds of your practice sale? Often the “assignment clause” is written allowing the landlord to request significant “consideration” (i.e. up to 50% of the practice sale proceeds to the landlord), or it allows them to deny your request altogether.
• Exclusivity: The “exclusivity clause”, or lack thereof, could allow your landlord to move a competing dentist right next door! To properly protect yourself from such a situation, the clause should list the dental specialties that your landlord cannot bring into the building; such as other “oral health professionals” or tenants practicing orthodontics, endodontics, oral surgery, etc. The more granular you get with your “use” provisions and exclusivity, the more protection you have over potential incoming competitors. An exclusivity clause is a must for new dental practice owners.

Take Precautionary Measures

The success of your dental practice and its ability to function, grow, and compete in the marketplace is highly dependent on the details outlined in your lease. The best defense is a good offense. While your real estate broker will help you find the ideal location, professional dental office lease negotiators (ideally equipped with in-house legal resources) will help you negotiate the best lease possible to ensure you are set up with the flexibility and protection for a long and fruitful career.

Cirrus’ Dental Office Lease Negotiation Services

Cirrus Consulting Group was founded by a group of dentists over 20 years ago; providing an obvious edge and unrivaled level of understanding and expertise. We are proud to have successfully negotiated over 10,000 dental office leases. For this reason, we continue to be the market leader in the dental leasing environment, delivering the best results.

With a full-service comprehensive approach, we are able to provide a stress-free negotiation environment for our clients, achieving a better quality lease that offers protection and good economic terms. Why take multiple avenues when you can take a direct route? Cirrus handles the entire negotiation process from start to finish, including access to a world class in house legal team and managing all dealings with the landlord.

Questions about your dental practice sale?
Contact a Cirrus expert to help you through the process.