For a new practice, you will need a realtor and a lawyer. Many associate dentists will invest countless hours finding real estate without legally protecting the real estate before signing.
Through my personal portfolio and our startup dentist clients, I’ve been a party to over $100 million in real estate transactions. The information you are about to read could save you from some of the biggest—and most expensive—mistakes I’ve seen.
First, before you sign for your real estate (with a purchase agreement or a lease), my team of consultants reviews your real estate documents to ensure they fit with the plans for your new practice.
Then, we share those top concerns with your dental attorney, coordinating the entire process. This extra set of eyes is a huge advantage to you.
Below, I will share with you some of the top legal issues you should consider for renting or buying.
If You Rent: Leasing Concerns for Startups
First, it’s important to remember that your landlord’s attorney wrote the rental agreement to protect the landlord. Landlords invest tens of thousands of dollars to protect their interest in the real estate.
Unlike residential real estate (where tenants have many layers of legal protections), commercial real estate gives the landlord all the legal control.
Read that again.
The more you understand these implications, the better off you will be.
Your goal as a tenant is to get as much protection as you can.
This is why you need a dental practice lawyer to protect your investment.
How much should you spend on legal fees for a lease review?
Normally, dentists are surprised at how high the legal bills are for real estate lease reviews.
But I want to show you why the right legal review is protecting at least $660,000 in your future.
How Much Is Your Dental Lease Protecting?
Let’s do some hypothetical math. We will pretend your rent is $3000 per month.
There is often a danger of assuming your financial responsibility with a lease is only as expensive as next month’s rent. But you will be shocked when you consider the math.
Your ASSUMED Rent Liability: $3,000
But the reality is that you will be legally responsible for the rent payments during the entire term of the lease. This means 5-10 years of rent payments.
ACTUAL Liability (3K x 120months): $360,000
In addition to this, you will have a compounded liability that most associate dentists are never taught about.
If you rent, you will most likely invest hundreds of thousands of dollars into construction and improvements into the landlord’s building. You can’t take this with you. When you sign your lease, you are committing to a compounded investment into this building.
Construction and Improvement Costs: $300,000
Therefore, your compounded liability is the ENTIRE investment you are making in the building. This includes your ACTUAL rent liability in addition to your construction costs ($360K + $300K).
COMPOUNDED Liability: $660,000
Why is the compounded liability important to you?
Because this is how much money you are PROTECTING with your Dental Attorney’s help. It’s a $660,000 investment.
Clauses in a Dental Lease
Do NOT try to negotiate your dental practice lease on your own. Just don’t.
Listen—I’m not an attorney, and I get nothing for saying this. But if you value the legal protection of your future practice, you want to hire a dental lawyer. It is worth the cost.
There are hundreds of ways you can lose your life savings in subtle, hidden clauses in your dental lease. You can even lose the value of your entire practice—to your landlord. I’ve seen it happen.
Frankly, it is virtually impossible to protect your practice if you attempt to represent yourself in legal negotiations with a landlord.
Read this article if you want to learn some of the scariest ways dentists lose their shirts in commercial real estate leases.
Worst of All – The RELOCATION CLAUSE
Don’t be like the dozens of doctors who contact my consulting firm after receiving the dreaded news that the practice is legally being relocated against the doctor’s will. It happens. But it could have been avoided with the right real estate legal strategy.
In summary: Get a great dental attorney who has helped at least 100 dental startups.
Don’t end up as someone else’s case study about doing things the wrong way.
If You Buy Real Estate: Concerns for Startups
Buying real estate is not complicated from a legal perspective. The transaction is a fairly simple legal process.
The bigger concerns come with being allowed to build a dental office in your newly owned real estate.
Each of the following must be explored from a legal perspective before you purchase.
“Zoning” refers to the type of business you are allowed to put in a piece of real estate. For example, you can’t put a factory in the old pizza shop. Towns have zoning laws about this.
Some doctors purchase a building only to find out it is legally impossible to open a dental office. Imagine the massive stress and financial loss!
Before you sign a purchase agreement, your dental attorney must ensure the zoning for that piece of land meets the town’s requirements for a dental office. EVERY TOWN’S ZONING LAWS ARE DIFFERENT.
Ignore what the so-called experts in Facebook groups try to tell you. You’ve been warned.
Most towns require a certain number of parking spots based on the type of business and the size of that business. This number differs from town to town.
For example, a small shoe shop may need just three spots. Your practice may need 10. Or 20. It all depends on the size of your practice and the town’s rules.
PARKING IS ONE OF THE BIGGEST REGRETS IN DENTAL CONSTRUCTION.
Most every doctor desires more parking, but some find out the hard way that they legally cannot build the practice to the size they desire because there aren’t enough parking spots. Imagine the implications of buying a building and realizing you can’t open your practice because of parking! You may think your patients can park next door–or across the street. Good luck with that.
Instead, avoid the stress, the cost, and the headaches by having the guidance of a dental practice lawyer who has helped at least 100 practice startups.
Have you heard this advice before?
Years ago, I helped my client Dr. Dan in Pennsylvania. He was told about a requirement to invest $40,000 in the drainage system to open his practice. It still shocks me that a few sewer grates and big plastic pipes in a small parking lot can cost so much. Thankfully, he knew about this before he bought the building.
But Dr. Danny didn’t know. He’s in a small town in Iowa, where the local permitting department is one guy named Inspector Joe. True story.
Inspector Joe never told Dr. Danny or his attorney about the $50,000 drainage system required for the corner property.
Dr. Danny got his permits and started construction on his new dental office—all signed off on by one of the top dental lawyers.
But Inspector Joe came by one day and said construction had to stop until Danny installed this $50,000 drainage system.
Dr. Danny already had his permits. And his loans. And his plans.
But no one from Inspector Joe’s office ever told Dr. Danny about the required drainage investment.
After the attorney reviewed the options, his advice to Dr. Danny was simple:
“You can fight the town and probably win. But do you want to make all those enemies in this small town along with all the delays and stress it will bring you?”
The answer was a simple and painful no. Our team found Dr. Danny the additional funding, but the whole process was a surprise to everyone involved.
Here’s the point: a great dental attorney will protect you, even if it prevents him from earning billable hours from a drawn-out drainage lawsuit that you will likely win.
And the moral to the story? Get a great dental lawyer if you want to buy real estate for your practice!