Starting or Opening a Practice

Personal Guaranty in Your Dental Office Lease: Let’s Not Make It Personal

There’s an old business adage that states one should always keep business and personal matters separate. While the intent of this saying is certainly sage business advice, it is often not something that a dentist can avoid in the world of commercial office leasing. The majority of our clients who are starting a dental practice, or have been in business for many years and are renewing their dental office lease often tell us that their landlords are demanding. Why? They often make them sign a “personal guaranty” or “indemnity agreement”, or else the deal is off!

This article is going to help you understand what a “personal guaranty/indemnity agreement” is as it pertains to your lease, and explain how as a small business owner, you can attempt to limit or avoid it altogether.

What is a “personal guaranty” in the lease, and why does your landlord care?

A personal guaranty, in its basic form, is a contractual agreement in your office lease that obligates an individual responsible for paying back a debt, in the event the tenant is in default. In regards to your dental office, it is a safety net that many landlords demand a tenant sign in order to ensure the financial performance of the lease continues, regardless of what happens with the tenant’s corporation, i.e. bankruptcy or business closure. It is important to note that a “guarantor” is often required to guarantee the obligations of not only the initial lease term, but also any “options to renew” or future extensions of the term.

For a startup dental practice, landlords often require you to sign a personal guaranty due to the lack of operational experience of owning a practice or renting commercial property. For an established […]

It’s Not JUST About the Dental Office Rent: Shifting Lease Negotiations

If I were to ask you which part of your dental office lease is the most important, what comes to mind? I doubt you would consider the assignment clause – the clause which governs your ability to purchase a practice or transfer the lease alongside the sale of your practice.

You probably wouldn’t think about the surrender clause – the clause which outlines how you are meant to leave your space when your lease term ends. Almost certainly you wouldn’t think about the relocation or redevelopment/demolition clauses, which, if exercised by the landlord, could unexpectedly force you out of your space!

No, I’m willing to bet you immediately thought the most important part of your lease is the rent. Well, I hate to be the bearer of bad news, but….it’s not just about the rent! While rent is certainly one of the key components of any lease, I’m here to teach you that it should not be your number one concern.
It’s Not Just About the Rent

Who could blame you for believing otherwise? Rent is the most obvious cost that a dental tenant incurs. Sometimes the payment of that monthly cheque is the only contact a dentist has with their landlord all year. It is therefore no surprise when a dentist focuses entirely on achieving the lowest rental rates possible at negotiation time, completely ignoring the rest of the lease agreement. However, to be perfectly frank, this approach is just plain wrong. Rent may be an “obvious cost”, but there are numerous hidden yet important costs that you should be more concerned about.
Hidden Costs vs. Obvious Costs in Your Dental Office Lease Agreement
An Assignment Nightmare

One such hidden cost is often found lurking in the assignment clause, and […]

Why Dental Tenants Are Gold to Landlords

When it comes to finding the ideal tenant for commercial office space, dental tenants are one of the most desirable businesses to landlords. Yet, dentists often fail to use this to their advantage when negotiating their dental office lease agreement. Before you enter into a new lease or renewal negotiation, here are a few things you should consider to understand why landlords prefer dental tenants, and how you can leverage this in your upcoming negotiation.
Why Landlords Prefer Dental Tenants Over Other Commercial Tenants
Low Default Rates
Dentists are favored tenants in the eyes of a landlord for many reasons. For one, they generally have low default rates in comparison to other types of businesses. In fact, they are known to have one of the highest credit ratings among professionals. Dealing with defaulting tenants can be a cost and organizational nightmare; therefore, landlords tend to favor businesses with generally low default rates.
Long-term Tenancy
Given the amount of work and large financial investment involved in opening a practice, most dentists choose a location with the intent of staying 10-20 years or more. This means a long-term lease and options to renew/extend, translating into a promising and steady revenue stream for landlords.
Increased Foot Traffic
There’s no doubt that a dental clinic draws foot traffic to a building/center, which in turn is helpful for other businesses in the vicinity, adding value to the building and resulting in a win for the landlord.
How Landlords Use the Lease Agreement
Landlords know very little about the business of dentistry, but what they do know about are lease agreements. The standard dental office lease is typically 30–50 pages long, outlining the tenant and landlord’s obligations to one another for the duration of the lease term. The lease […]

The Pros and Cons of Buying vs. Leasing Dental Office Space

When establishing a dental practice, one of the many decisions you may face is whether to buy or lease your dental office space. There are advantages and disadvantages to each. Making the best decision for your business depends on a variety of factors. Here are a few pros and cons of buying vs. leasing dental office space that you should keep in mind when reviewing these options.
Buying Commercial Space
Property Ownership Pros and Cons
Buying a building or other commercial space provides flexibility over how to use the space, and the freedom to control the property, as you are, in essence, your own landlord. You also have the opportunity to build real estate equity. These are the primary benefits of buying.

On the other hand, buying commercial real estate comes with its own disadvantages and risks. First and foremost, buying a practice requires a large up-front financial investment. You will be taking on quite a lot of debt in the form of a mortgage, and of course there are risks associated with any real estate investment.

A dentist who purchases will also acquire a great deal more responsibility, and as a landlord/property manager, increased duties and obligations will take time and concentration away from the core business of dentistry.
Protecting Company “A” and Company “B”
Acquiring a commercial property is expensive and comes with certain liabilities. It is recommended to keep your real estate investment and dental practice as separate business entities so that it’s not “the dental practice” that is buying the real estate. This helps to maximize the value of each, and also separates the applicable responsibilities and liabilities. A properly structured dental office lease agreement should be created between the two businesses to provide further protection. This will be […]

The Do’s and Don’ts of Dental Office Lease Negotiations

Your dental office lease is critical to the success of your business. A well-written lease agreement will protect your interests and allow your business to thrive and flourish. A poorly written one can limit business opportunities, burden you financially, or in some cases put you out of business. Avoid common lease pitfalls with these do’s and don’ts when entering into dental office lease negotiations.

DO Follow These Best Practices for Your Dental Office Lease Negotiation

You should always have a strategy in place when commencing lease negotiations with your landlord. Entering into a negotiation knowing what you would like to accomplish and how you may do so will be to your advantage. Review the lease agreement very carefully, taking into account your current business plans, future goals, and potential changes that may occur along the way.

Use clauses, exclusivity clauses, and renewal options are just a few of the many important aspects of your dental office lease. Given the importance of the lease to the future of your business, you may want to consider retaining a professional dental office lease negotiator for help.

DON’T Make These Common Dental Office Lease Negotiation Mistakes

Every term in the lease plays a role in shaping the success or failure of your practice. Don’t make the mistake of overlooking or accepting unfavorable terms. Make sure that you fully understand the intricate details of your dental office lease and its impact on your current and future operations before you sign it.

Think of lease negotiations like a game of Scrabble. Although you may cover the same sections of the board every time you play, the combinations of letters and how they work with one another will vary based on your strategy and end goal.

Similarly, every term […]

As Your Practice Goals Change, So Should Your Lease Agreement

As a dental professional, you will have to enter into dental office lease negotiations with your landlord at several points throughout your career, including when you are opening a practice, mid-to-late career when you are renewing your office lease agreement, and when you are planning for transition or for the sale of your dental clinic.

Since your practice goals are likely to change, so should your lease agreement. At each stage of your career in dentistry, your priorities and needs will be different. Therefore, your approach towards dental office lease negotiations should vary as well. Below are some important lease terms to consider at the different stages of your dental career.
Dental Office Lease Terms for Startups
Free-Rent Period and Tenant Improvement Allowances

Dental practice buildouts are expensive and can take up to 6-9 months to complete. It’s often possible to negotiate a rent-free period with your landlord in order to build-out your practice before opening your doors for business. In addition, landlords will often provide you with a Tenant Improvement Allowance (TIA), a sum to allocate towards the built-out of your space.

Relocation Protection

A well written out “Relocation” clause in your lease agreement can prevent your landlord from relocating you to another unit throughout your tenancy, or, limit the number of moves permitted during your term.

Practice Expansion

As your business grows, you will want the flexibility to expand your services and perhaps bring in associates. “Use” provisions in the lease outline the activities or services that you are permitted to perform in the space. Flexible wording in this clause is effective because it captures current and future use for your dental practice, without being restrictive.


Having a direct competitor in the same building as your practice can negatively impact the […]

Dentists Are Truly Unique Tenants

Dentists are not your typical commercial tenants. As a niche group with explicit, professional space requirements, an effective dental office lease should always be written with provisions unique to the business, while providing long term protection and runway for the practice’s success. Dentists must be conscious of this fact when negotiating the details of an office lease (before signing a new lease or a renewal). Below are a few reasons why dental office leases differ from the typical commercial lease.
Practice Buildouts Are Extensive
Unlike your typical retail tenant, there is an extensive amount of work that needs to be completed to convert an empty shell into a functioning dental office prior to opening the doors. Major construction and renovation is required to build out operatory and waiting rooms, as well as the installation of flooring, dental equipment, furniture and technology. Leasehold improvements such as electrical work, plumbing fixtures, hazardous waste disposal, and more will also be required. This can easily cost upwards of $350,000, taking an average of 3-9 months for build-out time. Language in the dental office lease should support the timeframe necessary for your office build-out.

It’s often possible to negotiate a free rent period into the lease to ensure you’re not paying for the space until your doors are open. It’s also often possible to negotiate a tenant improvement allowance (TIA) to help subsidize the costs for your buildout.

At negotiation time, pay close attention to “Surrender Provisions” in your lease, a clause that formally outlines how the space must be returned to the landlord when exiting. It is to your advantage to negotiate the wording of this clause to release you from the liability of having to restore the space back to its original […]

Practice Sale Woes: It’s All in the Dental Office Lease

When signing the dental office lease for your  practice, it is important to think about both the present and the future. Although you may not be considering retirement or selling your dental practice at the moment, things can certainly change during the term of your lease. Details in your lease agreement may directly impact the sale of your practice by preventing a smooth transition or reducing the value of your business. The following are a few important aspects of your lease agreement from a practice sale perspective.
Assignment Provisions in the Lease
Ability to Transfer the Dental Office Lease

When the time comes to sell your practice and you’ve found a buyer, the transfer of the lease can often be a little tricky due to “Assignment” provisions in the lease. It’s not uncommon that this clause permits the landlord to deny your request to transfer the lease; or the proposed transferee. They can often terminate the lease altogether at the mere request for an assignment, leaving you with 30 days’ notice to vacate!

The Right to Dental Practice Sale Proceeds

In the event that your landlord does approve your request to assign the lease, how would you feel about them taking 50% of your practice sale proceeds? Often, the Assignment Clause grants the landlord rights to a percentage of your sale profits, resulting in a less than favorable retirement savings plan.
Personal Guarantees in the Dental Office Lease
Who is listed as the tenant on the lease? Your lease may list your business, or you personally, as the lessee. Personal guarantees can leave you responsible for the lease even after you have transferred it to a new tenant. If the new tenant defaults, the landlord could have the right to pursue you for […]

Importance of Exclusivity and Use Clauses in the Dental Office Lease

There are many provisions in the dental office lease that should be carefully reviewed and negotiated to ensure they align with, and support your short and long term practice plans. Whether you are a startup dentist opening your first practice, renewing your dental office lease, or expanding or relocating your office, there are two particularly important provisions in the lease that can dramatically impact the future of your dental practice: the Exclusivity and Use Clauses.
Exclusivity Protection in the Dental Office Lease
Having a direct competitor in the same building as your practice will certainly impact the success of your business. Although there may be no current tenants in direct competition with you, you will want to protect your business from future changes in the building’s occupancy. An Exclusivity Clause is the best way to do so.

Exclusivity language in the lease is typically written in the landlord’s favor, granting them the flexibility to move anyone into the building without restriction. When written properly, this clause can be extremely helpful in protecting your business by preventing the landlord from renting space within the building/center to other dental professionals.

Negotiating the Exclusivity Clause in the Dental Office Lease

As with any contract, everything is negotiable. When negotiating exclusivity language, it is important to be specific; by doing so, you will leave less room for interpretation and misunderstanding. For example, the Exclusivity Clause can be written to prevent your landlord from moving any other dental professionals into the building, such as those practicing general dentistry, orthodontics, endodontics, oral surgery, etc.
The Impact of the Use Clause in the Dental Office Lease
Use provisions in the lease outline the activities or services that you are permitted to perform in the space. The details of this clause […]

Choosing the Right Dental Practice Location

Are you a dentist who is planning or considering opening a new dental practice; or are you looking to relocate your existing office? Choosing the right location for your business is one of the most important decisions that you will make in your career as a dentist; with many important factors that should be considered. Here are a few to keep in mind for optimal success.
Practice Visibility
The location of your dental office can provide valuable exposure and marketing opportunity. However, choosing commercial real estate in a high visibility location may also drive up rental rates and other operating expenses. Consider the amount of visibility that a location can offer your practice. How much traffic passes by? Be sure to consider both vehicle and foot traffic. Would your business’ signage be easily visible?
Convenience for Patients
Consider how convenient the location would be for your patients to access and park. For example: if the building is located on a stretch of highway, can people traveling in both directions easily exit and access the building without a complicated detour? Is there a parking lot or garage dedicated to the building? Is street parking available? Is parking free or metered/paid? How far will patients have to walk from parking to your office?

There is often a delicate balance between visibility and convenience. For example: a busy intersection may provide good visibility but could be a hassle for your patients to reach. Try to find an optimal balance between these two factors.
Practice Growth Potential
The actual dental office space is just as important (if not more) than the physical location of your practice. Consider if the space is sufficient for your practice needs. What are your long and short term growth plans? Is […]