The commercial real estate lease agreement is one of the most important contracts dental practice owners will sign. For many dental practices, rent is one of their largest business expenses. Making an informed, strategic decision about your commercial lease can help you negotiate the best terms possible with the help of an experienced attorney.
Dental practice owners are busy and may not carefully review their commercial real estate leases before they sign them. They may encounter a serious issue down the road when it’s too late to change the terms of their lease. You can avoid making the same mistake. The attorneys at Mahan Law will work with you and carefully review your dental lease. We can identify red flags and negotiate better lease terms. We represent clients nationwide and provide experienced legal counsel.
The Importance of Negotiating Your Dental Lease
One of the most common mistakes dentists make when signing a lease is accepting the terms as they are without negotiating them. This can lead to significant financial and operational risks. Dentists may assume that the boilerplate lease form their landlord provides them needs to be more negotiable. On the contrary, most leases, especially commercial leases, can be adjusted, added to, or modified.
Before you accept the landlord’s first terms, it’s important to review the lease with an experienced attorney. The real estate broker may try to tell you that the form they provided is a standard issue and can’t be modified. In reality, nearly all leases can be negotiated. Always try to negotiate a better deal.
The attorneys at Mahan Law have decades of experience negotiating commercial leases for dental practices. If the landlord refuses to alter the terms of the lease, we can try to persuade them to offer other concessions to you, such as a rent abatement, free parking, or a higher tenant improvement allowance. Don’t be afraid to walk away from the lease and look for another property if the landlord isn’t willing to work with you and offer you a fair deal for both parties. Once you sign a lease, you’ll be bound to its terms and conditions, even if they are unfair. Negotiating the lease and understanding your rights and responsibilities can help your dental practice stay profitable.
Negotiating the Length of a Dental Practice Lease
You may be wondering how long the lease should be. The term length of the dental practice lease can impact your practice’s overall success. If the lease is too short, it could hurt your practice because you’ll have to move locations too soon. Moving locations could result in losing recurring patients. Additionally, dental industry lenders may require you to have a minimum lease term before they will issue loans. Usually, this term is three years, but some lenders even require up to 10 years to approve a startup or practice acquisition loan.
On the other hand, the term line shouldn’t be too long. The longer the lease, the more risk you will be paying rent prices above market for a lengthy. Of time, especially if the market drops. One option is to negotiate a 5-year initial lease term with one or more options to renew the term every five years. This structure will give you more flexibility to negotiate the lease terms every five years and either relocate or remain in your location, depending on which option will benefit your practice more.
Triple Net Leases Vs. Gross Leases
Before you sign a commercial lease agreement for your dental practice, it’s essential that you understand exactly what type of lease you’re signing. Doing so is especially important if you’re comparing multiple options for the location of your dental practice. The two main types of commercial leases you’ll encounter are gross leases and triple net leases. Triple net lease, often abbreviated “NNN lease,” will require you as the tenant to pay for maintenance, building insurance, and real estate taxes on top of your monthly rent.
Taxes are paid on your prorated portion of the building’s common area, such as parking lots and lobbies. If you’re considering accepting a triple-net lease, negotiation with the help of an experienced attorney is crucial. An attorney can help you negotiate exclusions for shared expenses and try to place caps on annual increases.
Full-service or gross leases involve the tenant paying a flat rental amount each month. The landlord is responsible for paying for nearly every expense associated with the property. The landlord will pay for insurance, maintenance, taxes, and janitorial services.
Consequently, gross leases usually have a higher monthly rent amount, but having a flat rent amount can provide predictability and make it easier to budget. If you agree to a gross lease, it’s important that an attorney reviews the lease agreement to ensure the landlord isn’t trying to pass any additional expenses on to you unfairly.
Custom Dental Office Buildouts with Commercial Leases
If you are starting a dental practice or moving into a new facility and plan to renovate the space or build out the dental practice, the commercial lease agreement should address this process. In some cases, landlords will agree to a particular design and construction project. They may even provide the dentist with an allowance for construction expenses.
With the help of an experienced attorney, you may be able to negotiate an agreement for a temporary rent abatement while the project is under construction. Negotiating the terms of the build-out before you move in is important because you want to avoid moving in and realize the landlord will not let you renovate the space.
Contact a Commercial Real Estate Lease Attorney for Dental Practices
Before you sign a commercial lease agreement for your dental practice, speaking to an experienced attorney is beneficial. At Mahan Law, our experienced dental practice attorneys are here to help you locate a commercial property, negotiate the lease, and handle any other legal issues that may arise during the process. Don’t hesitate to contact Mahan Law to schedule a case evaluation and learn how we can help you find a commercial property for your dental practice.
