By Jayme Amos. Get free updates of posts here
It’s crucial to consider the
high-stakes realities of a
dental real estate lease.
If you missed Part 1 of this 3-part mini-series you can read it here
Dentists who are considering opening a new office will likely look at the possibility of leasing. After reviewing many leases, my team has found a few sure-fire ways to FAIL in the dental real estate lease game. Read below to learn about one of the scariest lease clauses in the country.
The Scariest Clause…Confession of Judgement
I was one of those kids who cried on the lap of Santa Clause.
I admit it!
But now I cry on the lap of a “different” kind of clause…
The Confession of Judgement Clause.
This one concept is so potently in favor of landlords that there are only a handful of states in the country who still allow the clause to be used in a dental real estate lease.
The concept behind a “Confession of Judgment” clause essentially goes like this:
…you’re guilty if the landlord says you are.
I’ve helped review dental real estate leases on commercial space in many states across the country and this one clause is the scariest of all. Found blended in between a hodge podge of legalese somewhere in the middle of the lease is wording that legally has you “confess” to any future “judgement” that the landlord brings against you.
In other words, if the landlord takes you up in court, you’ve already agreed you’re guilty.
You’ve effectively “confessed” a “judgement” against yourself.
In a dental real estate lease, confessing your “guiltiness” would imply you’ve broken the terms of your lease.
The cost to you as a tenant?
In most cases, the entire amount of the remainder of the lease then becomes due immediately.
In other words, if you pay $3,000 per month in rent and you have 20 months remaining, you would owe $60,000 immediately.
And you have to move out.
All because you confessed judgement by signing the lease.
I hope this concept sounds impossibly unfair to you…if it does, you understand the crushing power against you as a tenant in the building. But believe me when I tell you, this is not impossible – it happens everyday in multiple states around the country.
Why Landlords Do This
The next question to ask is: would a landlord really exercise his “Confession of Judgement” clause?
Perhaps. But landlords don’t want a bunch of guilty, broke tenants strewn around town like carcasses after a massacre. What landlords want is tenants who pay…tenants who make him a profit.
In that vein of thought, consider what might happen if the landlord needs to exert some leverage at a time in when his firm is in need of some untapped revenue? Could the confession of judgment clause be useful to him? Imagine what could happen if you were leasing from a landlord who could exert that kind of financial pressure on you. What would happen to your practice or your family’s finances if a landlord exerted the powers he had in a lease like that?
I hope you can sense the grave dilemma. I hope this sounds like a big problem.
Please don’t turn a blind eye to this – the world of commercial real estate can be financially deadly and the confession of judgment clause is one of the worst tools used against tenants.
We don’t want our clients to end up like confession of judgment carcasses!
So never forget the Clause…not the “Santa” Clause… the Confession of Judgment Clause.
As you look to open your practice and set yourself up for financial success, bring in the right resources who can guide you in the topic of a dental real estate lease.
Get free access to Part 3 in the Dental Real Estate Lease series right here.
Disclaimer: I’m not an attorney and none of this is to be considered legal advice. Consult an attorney in your state to discuss legal matters.
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