By Jayme Amos. Get free updates of posts here
A Dental Real Estate Lease is a Dangerous Tool.
Use it well and WIN…for decades.
If you missed Part 1 or Part 2 of this 3-part mini-series you can read them here:
The Dental Real Estate Lease FAIL (Part 1)
The Dental Real Estate Lease FAIL (part 2)
For dentists looking to open a new office, this article will give you some powerful strategies to use in your dental real estate lease negotiations.
Part 3: HOW TO WIN
(and how your landlord will try to win too)
Could Your Dental Real Estate Lease
Destroy the Future Sale Of Your Practice?
One of the worst financial stories you’ll hear about in dentistry is those retiring dentists who went to the closing table, selling their practice…when they discovered the landlord was legally entitled to 50% of the proceeds.
How might this happen?
It could happen if the dental real estate lease uses specific language.
In this example, language in the lease can creatively entitle the landlord to choose the appropriate future tenant.
And what might happen if the landlord has the final say on who he determines to be an acceptable tenant?
Could the landlord charge an arbitrary fee if he doesn’t find the new tenant “fit” for his building?
While completely unethical, there are provisions that can be put in a lease that could bring a doctor and the practice to this.
Are you seeing the huge problem here?
Is your blood boiling with injustice yet?
I hope so. This is real, messy stuff that you need to consider today.
See, some lease agreements have crafty hidden language that enables the landlord to participate in the proceeds of sale.
In this example, if the landlord never finds an “acceptable” tenant to secure your lease, you may have a problem. A big problem.
To Make Matters Worse…
As I’m sure you know, if you have no lease, you have no practice.
And if you have no practice, you have nothing to sell.
That means you could be left with nothing.
This is the equivalent of a hostage negotiation. But unfortunately, in this dental real estate lease hostage negotiation, you signed away your rights years ago.
It Doesn’t Need to Be That Way.
Don’t end up like those retiring doctors!
Retirement for you is years away but the time for preparation is now.
As you’re considering opening a new office, retirement may even be something you’re not including in the topic of a dental real estate lease.
But you must consider these realities now so your future financial situation doesn’t end in failure.
You CAN succeed in the leasing portion of your practice but you MUST go in with all the experience and preparation at your disposal.
Please remember this: Your current lease isn’t your residential lease from college days…this is the big leagues of commercial real estate when the landlords always wins. Always.
My clients go in to the lease with eyes wide open, everything fully disclosed and understood before mentioning a word to the landlord.
If you say the wrong thing, in the wrong way, the landlord of your “old” space could ruin your financial future.
It seems most small business owners have something in common: most think they are the rare, lucky commercial tenant who has a lease that gives them, the tenant, power and protection.
It’s possible that you may be one of the lucky ones. But a few steps of caution may help avoid disaster, if you get this right.
How Landlords Try To Win
Consider how landlords try to win and you may have a clearer picture of how we can avoid getting into a financial bind from your dental real estate lease.
Commercial landlords make it their full time business to profit at each stage of their lease.
Stage 1: deposit
Stage 2: tenancy and
Stage 3: departure (We’d like all dentists to exercise caution in stage 3. Extreme caution.)
Notice that the savvy landlord will make a profit from the tenant at all 3 stages.
Knowledge of this will put you in a much stronger position, prepared for a potential motive of the landlord to profit at each stage.
How Doctors Can Win with Their Lease
Stories abound of dentists who prepare to leave their office, finding the landlord has tens and sometimes hundreds of thousands of dollars of leverage against them…just for the privilege of leaving.
Through dozens of unfair clauses in a lease, a landlord can (and many do) use these tools in the lease.
How many business leases have you reviewed?
Imagine that your cousin just chose a dentist for a full-mouth reconstruction.
Your cousin tells you they chose a dentist who had experience with 2 such cases, years ago.
What would you tell your cousin?
You’d probably tell them to run!
You’d almost certainly tell them to find someone with the appropriate experience.
How many “business lease for dental practices” have you reviewed?
Get the point?
STEP 1 FOR YOU TO WIN:
Make sure you work with an expert – someone who has reviewed dozens or even hundreds of leases SPECIFICALLY FOR DENTISTS.
As you well know, the business needs of dentists are unlike any other profession and it will be important that you have an expert on your side who knows the dental world inside and out.
STEP 2 FOR YOU TO WIN:
Your Current Lease – Review your current lease AT LEAST A YEAR BEFORE you plan on leaving…and BEFORE you speak with the landlord. Don’t jeopardize your practice or your financial future! Make sure you don’t have unexpected costs on your way out the door by doing a thorough review of your current lease.
STEP 3 FOR YOU TO WIN:
Your Future Lease – The issue at hand is NOT the price. As I hope this 3-Part series has pointed out, there are serious considerations far beyond the price per square foot of a dental real estate lease.
“Review your future lease” sounds like common wisdom but I assure you it’s not common practice. Most will read the lease, examine it with their untrained legalese-eyes and determine that it looks “fair” then move to the signature page.
That signature page could ruin your financial future so we make sure your lease is clean and we make sure you get terms in that lease which will protect you.
Be protected. Be empowered. Be Prepared.
Remember the motivations and the profit stages of the landlord.
Remember how you can win.
And remember to work with the experts to protect your future, your finances and your family.
With high-stakes and the potential for even higher rewards, I want to make sure you’re fully educated and fully equipped to begin or end a dental real estate lease.
With the right team and the right preparation, you’ll be able to open your new office with total confidence!
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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