Buying a dental practice can feel like a major step forward—you might already be thinking about new patients and long-term growth. Before you sign a purchase agreement or letter of intent, though, it’s important to look closely at the legal and financial terms tied to the transaction.

Purchase agreements often contain clauses that shift risk to the buyer in non-obvious ways. A careful review can help you spot problems before they become legal claims.

Representations and Warranties

Representations and warranties describe the condition of the practice. These provisions are important because they determine whether you have legal remedies if you discover problems after the sale closes. Many agreements include broad statements about the practice’s:

• Finances
• Patient records
• Equipment
• Insurance billing
• Regulatory compliance

A vague or incomplete representation should raise concerns. Look for clear language addressing key issues, like:

• Accuracy of financial statements
• Who owns the equipment and assets
• Compliance with HIPAA and state dental regulations
• Payer contract status
• Pending audits, investigations, or lawsuits
• Employee classification and payroll practices

Some agreements also try to limit the seller’s responsibility by shortening the timeframe for bringing claims or capping damages. A clause that gives you only a few months to identify hidden issues may leave you responsible for expensive problems you find later. Fraud-related provisions deserve close review, too. Some agreements might attempt to waive fraud claims or restrict available remedies.

Liabilities You May Inherit 

Depending on how your transaction is structured, you could inherit debts and other liabilities from the previous owner. Asset purchases generally provide more protection than stock or entity purchases because you select which assets and liabilities come with the sale. Even in an asset purchase, though, the agreement may assign responsibility for certain obligations. These liabilities may include:

• Outstanding vendor contracts
• Unpaid payroll taxes
• Employee wage and hour claims
• Insurance repayment demands
• Patient refund disputes
• Equipment financing obligations
• Pending litigation

A strong due diligence process can help uncover these problems before signing. Financial statements, tax returns, and other records all need careful review before you commit to the purchase.

Lease Assumptions and Real Estate Terms

If the practice location is leased, you may need to assume the seller’s lease or negotiate a new agreement with the landlord. A weak lease can affect the long-term value of the practice—including your ability to continue operating in the same location. Be sure to review the:

• Remaining lease term
• Renewal options
• Personal guaranty requirements
• Rent escalation clauses
• Responsibility for repairs and maintenance
• Restrictions on office renovations
• Assignment approval requirements

Landlord consent provisions can create delays or derail transactions entirely. Some leases prohibit assignment without written landlord approval. Others give landlords broad discretion to reject the transfer.

Personal guarantees can also be a red flag. Many commercial landlords require the buyer to personally guarantee lease obligations. That can expose your personal assets if the practice struggles financially.

Exclusive use provisions matter as well. Without proper protections, another dental office could move into the same building or shopping center and compete directly with your practice.

You should also verify whether the office complies with accessibility requirements and zoning regulations. ADA-related issues or unpermitted renovations can be expensive surprises after closing.

Restrictive Covenants

Restrictive covenant provisions can limit where and when the seller can compete after the sale. A properly drafted non-compete agreement may help protect the goodwill you purchased with the practice, but it’s important to make sure yours complies with state and federal law. Your lawyer should review all agreements for:

• Overly broad geographic restrictions
• Excessive time limitations
• Vague definitions of competition
• Restrictions affecting future associates or partners
• Patient solicitation provisions
• Employee non-solicitation clauses

For example, a clause barring the seller from practicing “near” the office may become difficult to enforce because the term lacks a clear definition. Some agreements also include limitations affecting future practice expansion or referral arrangements. Finally, the agreement should address how the transition will be announced and whether the seller will encourage patients to remain with the practice.

Post-Closing Obligations

Some dental practice purchase agreements include ongoing obligations for months or years after the sale. These clauses should clearly define:

• Work schedules
• Compensation terms
• Patient introduction responsibilities
• Access to records and systems
• Duration of transition services
• Tax obligations

Careful contract review before signing can help identify these issues while there is still time to negotiate better terms.

Get Experienced Guidance from Our Dental Lawyers

If you are considering buying a dental practice, strong legal guidance can help you evaluate the risks and potential rewards. Mahan Law – Dental Attorney works with dentists on practice purchase matters, contract review, and transactional issues. Contact us today to get started.