Is your dental practice looking for new office space? If so, you have two general options available to you: renting or leasing from someone else or buying your space outright. However, there are certain advantages and disadvantages to each option. Mehan Law explains what you need to know so that you can make an informed decision and protect the health of your practice.

Leasing Office Space: Legal Pitfalls and Protections

Many dental practices choose to lease office space, as leasing can provide several benefits, such as flexibility in relocating if the space becomes less suitable and avoiding the significant expenses associated with building maintenance. However, negotiating a commercial lease for office space for a dental practice may involve potential legal issues, such as:

Rent increases or escalation clauses in the lease
Long lease durations or limited renewal options
Use restrictions that may prevent expanding into specialty practices
Other lease restrictions, such as for subleases or assignments
Allocating maintenance and repair obligations between the landlord and the tenant

Depending on the current state of the property, a dental practice leasing office space may need to negotiate tenant improvement and build-out allowances to afford interior constructions or renovations that make the space more suitable as a dentist’s office. Furthermore, dentists should exercise caution when a landlord requests a personal guaranty of the lease payments, which can make the dentist liable if the practice misses rent.

Buying Office Property: Legal Considerations

Dental practices that want to ensure the permanency of their office location should consider buying commercial real estate to house their practice. Purchasing an office for a dental practice will involve various preliminary steps, such as:

Title searches to ensure the seller has good title
Due diligence, including building inspections to reveal potential problems such as structural or roof damage, or HVAC or electrical issues
Zoning compliance to ensure your practice can operate a dental office at that location, or the feasibility of obtaining a zoning variance if local laws do not permit dental practices at the location

There are other potential considerations when buying commercial real estate for a dental practice may include other considerations. One critical one is how to hold title to the property. A solo practitioner may choose to own the property in their name. On the other hand, a dental practice may own the property in the practice’s name if organized as a partnership, LLC, or professional corporation. Alternatively, a practice may choose to hold property in a separate LLC or corporation wholly owned by the practice, which can provide liability protection for premises liability claims.

Some of the risks of buying property to house a dental office include:

Environmental issues, especially if the property already suffers from contamination
Compliance with building codes
Deed restrictions that may limit the use of the property
Ongoing building maintenance costs, including roofs, HVAC systems, and electrical or plumbing systems

Considerations for Dental Startups vs. Expanding Practices

There are several critical factors that dental startups should consider when deciding between leasing or buying space for a dental office, such as:

Flexibility: New dental practices should consider the possibility that their needs may quickly change or outgrow the space they lease or buy, which may require them to ensure that a real estate deal offers maximum flexibility.
Ability to obtain lease-to-own deals: New practices that cannot afford to buy office space may pursue lease-to-own options, allowing them to own their space as they expand and grow.
Potential for shared or subleased space: A dental startup might consider shared or subleased office space, which comes with additional challenges. These include difficulty differentiating its practice from other businesses in the space or maintaining security for equipment and patient information.

Here are some key considerations for established practices, including those looking to expand to additional locations:

Location permanence: Established practices may want to ensure their ability to stay in their current location, which can solidify relationships with the patient base.
Ability to brand: Buying office space can provide a dental practice with better opportunities to secure their branding on the space than with a lease.
Negotiating favorable lease terms for new locations: Established practices may expand to new offices by starting with leases that provide maximum flexibility, in case an expansion location ultimately proves unsuccessful.

Why Legal Counsel Matters

Before you sign a lease or purchase real estate for your dental practice, protect your interests by speaking with an experienced attorney. Remember, the terms of your lease or purchase agreements will define your rights and obligations as a tenant or buyer. An attorney can review these terms to help you understand the meaning of the contract’s provisions. An attorney can also negotiate contracts to ensure they have fair terms that respect your interests, protect you against liability, and avoid potential pitfalls that could jeopardize your practice or your financial interests. You should have an attorney review the deal documents to protect your rights, even if you have a real estate agent working with you to secure a commercial lease or purchase office space for your dental practice.

How Can Our Firm Help You?

At Mahan Law, we focus specifically on representing dentists and dental practices. Our legal team can help you pursue a favorable lease or purchase agreement and protect your interests by:

Explaining the pros and cons of renting versus buying office space for your dental practice
Reviewing proposed lease agreements and negotiating commercial lease deals or real estate purchase agreements
Forming separate legal entities for real estate holdings as appropriate
Helping you understand your rights and obligations under a proposed commercial lease or real estate purchase agreement
Securing necessary business or occupancy licenses, zoning/land use variances, commercial property insurance policies, and title insurance
Advocating for your interests during dispute resolution with landlords, sellers, neighbors, or local zoning boards

Contact Us Today for Experienced Legal Guidance

Before you sign a lease or a purchase agreement to obtain new space for your dental practice, you should consult an experienced dental attorney who can help you understand the pros and cons of renting versus buying office space for your practice. Contact Mahan Law today for a confidential consultation to protect your rights and interests by getting the advice you need to make an informed decision about what type of real estate transaction to pursue.