Most Critical Lease Terms for Dentists
Commercial leases are long, complex documents where important provisions can be buried in boilerplate language. Dentists should prioritize negotiating these high-impact terms before signing.
Assignment Rights
Determines whether you can transfer your lease to a buyer when selling your practice. Restrictive assignment = landlord leverage at sale.
Lease Term & Renewals
Initial term plus renewal options determine your occupancy security. Buyers want 10+ years remaining when acquiring practices.
Exclusivity Clause
Prevents landlord from leasing to competing dental practices. Without this, another dentist could open next door.
Personal Guarantee
Makes you personally liable for lease obligations beyond your business entity. Negotiate limits and burn-down provisions.
"In our dental practice M&A work, lease issues are among the most common deal complications we encounter. Dentists routinely sign leases without considering exit implications, then discover years later that their landlord holds significant leverage over their practice sale. The time to negotiate assignment rights is before you sign, not when you have a buyer waiting to close. We advise every dentist to treat lease negotiation as practice exit planning—because it is."
Assignment Provisions
Assignment provisions govern whether and how you can transfer your lease to a buyer when selling your practice. These terms directly affect practice marketability and your negotiating position at sale.
What To Negotiate
Assignment With Consent
Most leases require landlord consent for assignment. The key is how that consent standard is defined. Push for language stating that landlord consent "shall not be unreasonably withheld, conditioned, or delayed." Without this, landlords can reject qualified buyers or impose unreasonable conditions.
Deemed Consent / Response Deadline
Require landlord to respond to assignment requests within a specified timeframe (typically 15-30 days). If landlord fails to respond, consent is deemed granted. This prevents delays that can kill deals.
Release of Guarantor
Upon successful assignment to a qualified buyer, you should be released from personal guarantee and ongoing lease obligations. Without release language, you remain liable even after selling.
Assignment to Practice Buyer vs. General Assignment
Some leases distinguish between assignment to a successor dental practice (often permitted with consent) versus general assignment (restricted). Ensure your lease clearly permits assignment to another dental practice under reasonable terms.
Landlord Leverage At Sale
Landlords understand that practice sellers need lease cooperation. Without protective assignment language, landlords may demand rent increases, additional security deposits, extended personal guarantees, or other concessions as the price of consent. This leverage can cost you tens of thousands of dollars or even derail your sale. Negotiate assignment rights now, not when you are trying to close a deal.
Financial Terms
Beyond base rent, commercial leases include numerous financial terms that affect your total occupancy cost. Understanding the structure helps you compare options and negotiate effectively.
Rent Structure
| Term | What It Means | Negotiation Focus |
|---|---|---|
| Base Rent | Fixed monthly rent for the space, usually quoted per square foot annually | Compare to market rates; negotiate initial rate and escalation schedule |
| NNN (Triple Net) | Tenant pays base rent plus property taxes, insurance, and CAM | Understand what's included in CAM; cap annual increases |
| CAM Charges | Common Area Maintenance: shared building expenses allocated to tenants | Review what's included; negotiate caps and exclusions |
| Rent Escalation | Annual rent increases, either fixed percentage or tied to CPI | Cap escalation at 3% or negotiate fixed dollar increases |
| Free Rent / Abatement | Period of reduced or waived rent, often during buildout | Negotiate 2-6 months depending on market and buildout timeline |
Personal Guarantee Considerations
Personal guarantees make you individually liable for lease obligations if your practice entity defaults. While common, especially for new tenants, guarantees should be negotiated to limit exposure.
- Burn-down provision: Guarantee reduces over time (for example, covers 5 years initially, reducing to 3 years after year 2, then 1 year after year 4).
- Cap on guarantee: Limit guarantee to a specific dollar amount or number of months' rent rather than the entire lease obligation.
- Good-guy clause: Guarantee terminates if you vacate and surrender the space in good condition with proper notice.
- Release upon assignment: Guarantee terminates when lease is successfully assigned to qualified successor.
Negotiating A Dental Office Lease?
Get experienced review of lease terms with focus on practice protection and future sale flexibility.
Schedule ConsultationOperational Protections
Beyond financial terms, operational provisions protect your ability to run your practice effectively and maintain practice value.
Exclusivity Clause
Prohibits landlord from leasing space to competing dental practices in the building or complex. Essential for protecting your patient base from direct competition at your location.
Use Clause
Defines permitted uses for your space. Should be broad enough to cover all dental services you might offer, including specialties you may add later.
Renewal Options
Right to extend the lease at specified terms. Multiple renewal options (such as two 5-year options) provide long-term security and practice value.
Signage Rights
Right to install practice signage on the building, monument sign, or directory. Visibility matters for patient acquisition.
Hours of Operation
Some leases restrict hours or days of operation. Ensure lease permits your intended schedule including evenings and weekends if needed.
Subordination, Non-Disturbance, Attornment (SNDA)
Protects you if landlord's lender forecloses. Non-disturbance means your lease survives foreclosure. Critical protection often overlooked.
Tenant Improvements
Dental buildouts are expensive, typically $150 to $300+ per square foot for full dental office construction. Negotiating tenant improvement allowances and understanding buildout terms significantly affects your initial capital requirements.
Tenant Improvement Allowance (TIA)
Landlords often contribute to buildout costs through a tenant improvement allowance. The amount varies by market, property type, and lease term. Dental tenants are attractive because their specialized buildout makes relocation costly, reducing turnover risk for landlords.
Example: TIA Negotiation
Space: 2,500 square feet
Estimated buildout cost: $400,000 ($160/sq ft)
Landlord's initial TIA offer: $50/sq ft = $125,000
Negotiated TIA: $70/sq ft = $175,000
Your capital requirement: $400,000 - $175,000 = $225,000
Buildout Considerations
- TIA disbursement: Understand when and how TIA is paid. Some landlords reimburse after completion; others pay in stages. Cash flow matters during buildout.
- Improvement ownership: Clarify who owns improvements at lease end. Some leases require tenant to remove improvements; others transfer ownership to landlord.
- Landlord approval: Understand what plans require landlord approval and realistic timeline for approvals. Delays cost money.
- Contractor selection: Some landlords require using their contractors. Negotiate right to select your own licensed contractors for dental-specific work.
"One of the most overlooked lease negotiation points is improvement ownership at lease end. Dentists invest hundreds of thousands in dental-specific buildouts, then discover at exit that the lease requires them to remove improvements or that the landlord claims ownership. This matters at sale because buyers are acquiring the physical practice, not just the patient base. Clarify improvement ownership and removal obligations before you sign—and document it clearly in the lease."
When To Speak With A Dental Practice Transaction Attorney
Commercial lease negotiation benefits from experienced legal review, especially when the lease affects practice value and future transactions. Dentists should consider consulting with a dental M&A attorney when:
When To Consult A Dental M&A Attorney About Leases
- Negotiating a new dental office lease — to ensure assignment provisions, renewal options, and operational terms protect your investment and exit options
- Acquiring a practice with an existing lease — to review lease terms, assess assignment requirements, and negotiate with landlords as part of the transaction
- Renewing or extending a lease — to improve unfavorable terms before committing to another multi-year term
- Selling a practice with leased space — to navigate landlord consent requirements and protect deal completion
- Facing landlord disputes or lease violations — to understand your rights and negotiate resolution
- Evaluating lease terms in DSO transactions — DSOs have specific lease requirements and often renegotiate leases as part of acquisitions
Jaffe Law PLLC represents dentists in practice acquisitions, sales, DSO transactions, and related real estate matters including lease negotiation and review. Schedule a consultation to discuss your specific situation.
