Finding a location for your dental practice can be difficult. You may want to find a location with great visibility, a short commute, less competition, or all of the above. Once you find the best location possible, it can be tempting to sign the dental practice lease without discussing the lease with an attorney.
Taking the time to understand all the terms and clauses of your dental lease can help you protect yourself. The lease may include burdensome provisions that will endanger your dental practice. The experienced attorneys at Mahan Dental Law can help you review the lease, identify any red flags, and negotiate a better lease that protects your interests. We represent dentists throughout the United States. Contact us today to schedule your initial consultation.
Types of Dental Practice Lease
Dentists need to understand the specific type of lease that is being offered. For example, a dentist comparing multiple leases should be aware of the different types of leases he or she is reviewing. For example, comparing the base rent amount in one lease to the base rent amount in a second lease may not help you understand the differences between the leases.
Gross Lease
A gross lease covers nearly all the expenses associated with the dental practice space. The base rent, maintenance, taxes, insurance, and janitorial services are typically included. You will likely pay a higher rent price when you sign a gross lease, but you will benefit from a consistent rent overhead figure, making it easier to budget. On the other hand, some property owners find ways to pass inappropriate expenses on to the tenant in a gross lease.
Triple Net Lease
A triple net lease involves the dentist paying a base rent amount monthly. The amount paid under a triple net lease is typically less than a gross lease. The tenant will also pay a percentage of the common area maintenance costs, such as the parking lot, lobby, storage area, etc. The tenant pays utilities, property insurance, and property taxes. Triple net leases provide dentists with the greatest opportunity to negotiate. Your attorney can help you negotiate caps on the annual amount your expenses can increase under your lease. You can also negotiate to exclude certain shared expenses, such as common area maintenance costs.
Assignment of a Dental Practice Lease
When a dentist retires or sells his or her practice, he or she may want to assign the lease to the dentist who is purchasing the practice. Doing so can be beneficial because the purchasing dentist doesn’t have to negotiate a new lease with the property owner. Lease assignments allow the dentist purchasing the practice to smoothly transition after the owner retires. The property owner will need to approve the lease assignment. It’s wise for the purchasing dentist to have the existing lease reviewed by an attorney to avoid any red flags.
Determining the Length of the Lease
The length of the dental practice lease is one of the most important provisions in the lease agreement. Before you begin the negotiation process, it’s wise to confirm with your lender how long the lease agreement needs to be. Most lenders require the lease to be in operation for at least 10 years in a practice acquisition or start-up loan. Many dentists prefer to start with a five-year initial term with an option to renew every five years. Typically, the property owner and the leasing dentist will renegotiate the rental fees every five years.
Specific Terms and Clauses
An attorney can help you understand all the clauses in your lease agreement. It is wise to have an understanding of your duties and your landlord’s obligations to you. Some dental practice leases contain harmful provisions. For example, there may be a relocation clause in your lease that permits the property owner to evict you and place you into another space in the building without your consent.
Relocation clauses can be disastrous for your dental practice, especially if the property owner doesn’t have to reimburse you for moving expenses, pay for your build-out, or chooses to place you in a smaller size space in the building. An attorney can help you push to remove the relocation clause or include language that mitigates any risk of out-of-pocket expenses for you.
It’s also important to understand how much rent you will be paying every month. The termbase rent refers to the minimum amount of rent you will pay. Typically base rent is calculated by multiplying the square footage of your premises and the agreed price per square foot. If you have a triple net lease or a modified gross lease, you will also need to pay additional expenses, such as real estate taxes, insurance, and a portion of the common area maintenance expenses.
Option to Buy From a Dental Practice Lease
Another important question you should ask before signing the lease is whether the lease gives you the option to buy the practice if the property owner sells the property. Does the lease establish a premeditated price or a way to determine the price if there is an option for you to purchase the practice? If you would like to include an option to purchase the practice, an attorney can help you negotiate with the property owner.
Negotiating a Dental Practice Lease
After finding the best location possible, it can be tempting to sign the lease agreement to get the process moving. The thought of negotiating the lease agreement may not cross your mind. However, it’s important to work with an attorney to understand the lease agreement terms. In most cases, an attorney will find red flags that could damage your dental practice. An attorney can negotiate effectively with the property owner to include provisions that protect you and remove provisions that put you and your practice at risk.
Reach Out to a Dental Practice Lease Attorney Today!
Working with an attorney before signing your dental practice lease can help you protect yourself. An attorney can help you research the lease agreement and tactfully but aggressively negotiate a more advantageous lease agreement. Before you sign a dental lease agreement, reach out to the experienced attorneys at Mahan Dental Law.
Mahan Dental Law helps their clients with any dental practice lease decisions throughout the United States including the states of Ohio and Kentucky.
