Entering into a lease agreement for your dental practice is one of the most important decisions that you will make for your dental practice. It is probably one of the first contracts you will sign to open a new practice or to continue to run your existing practice.
There are both financial and non-financial terms that should be properly negotiated to protect your rights in your lease agreement for your dental practice. These are complicated and convoluted provisions that if they are not properly negotiated could besiege your practice for years to come, and their negotiations should be trusted to a sophisticated attorney who is experienced in drafting and negotiating lease agreements for dental practices.
Some Clauses to Avoid in a Lease Agreement for Your Dental Practice.
Many landlords try to sneak in a language in lease agreements that gives the landlord the option to move your office from one location in the shopping center or building to another office space within the shopping center or building, or worse yet terminate the lease by giving you a short notice.
These terms mean that after you make a large investment in building out your premises, building your operatories, and installing your dental equipment and instruments, the landlord could make you move to a new office or even terminate the lease.
If you have signed a lease agreement that provides the landlord with that option then your investment in your dental office could simply go to waste. However, due to the potential patient attrition rate as a result of moving your dental office, your damages from your lost investment and patients could easily add up to hundreds of thousands of dollars, and perhaps millions of dollars for larger dental group practices.
Is It Enough to Have an Option to Renew in Your Lease Agreement for Your Dental Practice?
A different but a related topic is whether you have an option to renew your lease agreement. However, just having the option to renew does not mean that you have negotiated the rent for the option period and the new increased rent may be cost prohibitive and render your option period essentially meaningless.
The lease agreements for dental practices should be negotiated so that there is a cap on the rent for the renewal period. You want to maximize your investment in your dental practice, and avoid wasting your investment on a short-term lease, not to mention that it will be more difficult to sell your practice if you have a short period left on your lease.
Clearly in those situations the landlord will have the upper hand unless you have foreseen this situation and negotiated a lease that deals with it before it ever comes up. You should therefore negotiate a lease agreement that provides you with an option to renew your lease based on previously negotiated rent for said renewal period.
Provisions in Lease Agreements That Take Away Your Control over Your Dental Practice.
Another issue that should be properly negotiated in lease agreements for dental practices is whether you maintain control and the right to sell your dental practice or even bring in a partner, if you decide to do so after entering into a lease agreement. Through the terms of the lease agreement, many landlords attempt to control your right to sell your dental practice or even the right to bring in a partner. In a nutshell, these provisions attempt to control your dental practice and what you can do with it.
Because landlords cannot reject your right to sell your dental practice outright, some attempt to include a language in the lease agreement that states the landlord, at its sole discretion, can reject your lease from being assigned to any other person or entity. The net result is that you will not be able to sell your practice if you cannot assign your lease to the potential buyer.
Another attempt by landlords to gain control over your dental practice in an attempt to deny the ability to transfer 50% or a larger share of your stocks in your Professional Corporation or Professional Association, or your membership interest in your PLLC or LLC. These terms should be properly negotiated so that the landlord’s say in the matter is limited to a reasonable standard, as opposed to landlord’s sole discretion, which means that if the potential buyer of your practice or your future partner has similar level of credit rating, net worth, etc., the landlord may not deny the lease assignment to the potential buyer or transfer of shares or membership interest to your potential partner.
Lease Agreements for Dental Practices That Provide for Evicting a Tenant for Minor Violations of Lease Terms.
The Lease Agreements for Dental Practices could be 30-40 pages long and each provision and terms is intended to place on obligation on you as a tenant. Technically, the violation of any of the terms in those 30-40 pages could be considered a breach of the lease agreement by you which could entitle the landlord to collect various penalties or even to evict you from your dental office.
You should be wary of terms in lease agreements regarding what is considered a breach and whether you have a right to cure the breach before you are in breach of your lease agreement. Otherwise, you may find yourself in breach of the lease agreement for minor violations, followed with fines and penalties and even the possibility of being evicted from the premises.
These provisions also give the landlord the chance to look for excuses to hold you in breach if they want to evict you because they want to bring in a tenant that will be more lucrative for the landlord or if the landlord wants to sell its property to a buyer who wants to demolish and rebuild the building and you happen to be in the way.
The lease agreement for your dental practice should be negotiated so that if there are any alleged breaches of the lease terms by you, the landlord is obliged to notify you and provide you with a reasonable opportunity to cure said deficiency so that you will not be held in breach that will subject to penalties or even eviction.
You should have proper legal representation from an experienced dental practice attorney for reviewing and negotiating a lease agreement for your dental office that will not put you at your landlord’s mercy.
Kamkari Law – Dental Medical Attorney
Experienced Lawyer for Lease Agreements for Dental Practices