Your Dental Office Lease Can Affect the Sale of Your Practice

Whether you are happy with your current dental office lease or not, you may be unaware of the hidden provisions in your lease contract that could cause you harm. There are certain lease provisions that make it either difficult or impossible to sell a dental practice, assign a lease, or gain the full value for your practice in a sales agreement. As a significant portion of a dental office’s value is tied to location, this is a serious issue. Whether you wish to sell now or not, you’ll want to protect your rights for the future by understanding these important dental office lease terms.

Lease Assignment Provisions

Any “assignment” clause in your current dental practice lease could affect either your ability to sell your dental practice or have an impact on the proceeds from a sale. For example, some lease assignment provisions require that you request permission to transfer the lease. In some cases, permission can be denied and the lease terminated with a notice to vacate. In other situations, a landlord might approve your request to assign the lease, but provisions in the contract allow them to take a percentage of your practice sale proceeds, leaving fewer profits in your pocket. Personal Guarantees in a Dental Office Lease

When you seek to lease a dental space, consider who you will list as the tenant or guarantor on the lease. You might register your business name or yourself on the contract, and either can have lasting implications. A personal guarantee on a lease document can last even after you’ve transferred to a new tenant. Your best course of action is to negotiate a time limit into the lease to specify liability for rent after the lease is assigned.

Rigid surrender language in a lease contract may require the tenant to restore the property back to its original condition. This can be a costly process that involves steep construction fees, which could Undermine the value of your practice.

Lease-End Requirements

A restoration and surrender clause in a lease can affect a practice’s value and deter potential buyers from making desirable offers. Rigid surrender language in a lease contract may require the tenant to restore the property back to its original condition. This can be a costly process that involves steep construction fees, which could undermine the value of your practice.

Potential for Practice Expansion

While you may not have any plans to expand beyond traditional dentistry, it’s possible that a future owner does, and certain “use” provisions in a lease contract might prevent this. As you consider your lease options, your contract should include enough flexibility so that alternative forms of dentistry can be practiced in the office and your future sale isn’t jeopardized.

There are several terms in a dental lease that need to be negotiated so that your future plans aren’t put on hold or blocked altogether. While you may not wish to sell your practice now, planning ahead will make for a smoother transition when the time comes. Working with the right real estate advisory firm is the first step to making sure both your present and future interests are considered. Contact Joseph Rossi & Associates today to find out how we can help you navigate the world of dental real estate.

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