Just as the dental office lease agreement is critical to your practice as a tenant, it is also equally critical to your business when you own the building (or real estate) that you practice in.

A properly structured dental office lease agreement between the practice and building is critical to maximizing the value of their practice and the property, and will offer the protection necessary to support the future growth of their business, and yours.

Why does the lease matter if I own the building?

Acquiring a commercial property is expensive and comes with certain liabilities. As such, it is smart to acquire the property through a different company (legal entity) than your dental practice so that it’s not “the dental practice” that is buying the real estate. Therefore, there should be two separate companies: “Company A” (the building/landlord), and “Company B” (the practice/ tenant).

Your dental office lease agreement will help separate the responsibilities and obligations between these two parties, and establish important details such as how much rent you should pay each month and who will be responsible for paying for building repairs (operating costs) when they arise, while at the same time ensuring the this ‘separation’ of the two assets maximizes the value of each business.

The Office Lease: Facilitating Your Practice Sale

As a building owner and dentist, the appraised value of your practice will still be determined by three main components:

The equipment,
The goodwill (patients)
The dental office lease agreement.

Without a properly structured lease in place, you will face multiple challenges when the time comes to sell your practice. It’s important that future buyers feel confident that the practice has a long-term lease already in place with fair and affordable terms that will support their success and provide them with the flexibility to run the practice and grow.

Leasing Items to Consider for Your Practice Sale

Term & Options:  The lease should provide sufficient term and “options to renew” that are available to both you and future buyers. Often language in the lease is written to prevent future tenants from exercising their options after the lease is transferred from one tenant to another.
Practice Assignment: The assignment language should support a smooth practice transition while providing protection to future buyers for their practice assignment.
“Use” Provisions:  Customize the “use” and “associate” language to provide the flexibility for tenants to bring in associate dentists and practice alternative forms of dentistry in the space, enabling them to maximize their business and compete in the marketplace.

Creating a Lease to Drive Success

By securing a lease that outlines these and other pertinent details, you will help secure both the future success of your property and your dental practice.

Cirrus Consulting Group offers dentists and future property owners Standard Form Lease Creation Services. Our leasing experts create a custom lease for building owners based on their goals and practice needs that will protect their assets, maximize practice value, and provide enough term and options for a smooth practice sale down the line.

We’ve also developed a white paper for property owners about the dental office lease, a learning guide to help you understand the importance of the lease agreement when you lease and own the space, and how to transition safely into the new role of “property owner/landlord”.  Click here to download the white paper now.

Questions about your lease or property?
Contact us for a personalized lease chat below.