Knowing that it’s time to negotiate or renegotiate your dental office lease can feel like an impending cloud of doom, but there’s no reason to dread the process. As we always say, readiness is half the battle. You should see this as an opportunity to turn the negotiation tables in your favor. A poorly structured dental office lease is detrimental to your business, while a well-crafted lease will allow your practice to thrive – and there’s always room to improve. Here are three simple tips to navigate a dental office lease renewal negotiation, and come out on top.
1) Get a head start on your renewal: By leaving your lease renewal to the last minute, you give up your leverage to negotiate better terms. If you’re late to the party, the landlord will demand a lease that favors their interests (both financially and legally), knowing that they can simply terminate your tenancy and evict you from the building/center if you don’t accept their terms.
Far more disconcerting is if you miss your lease renewal or expiry deadline entirely, putting you in the precarious position of being a month-to-month or â€œoverholdingâ€ tenant. At this point, your landlord can double your rent or evict you with 30 days’ notice to make room for a higher-paying tenant. Luckily, this scenario is entirely avoidable! We advise that you begin the lease renewal process at least 18-24 months before the deadline, providing you with ample time to bring the landlord to the table.
2) Review your current lease agreement and identify gaps and problem areas: Start by reviewing your existing lease, and familiarizing yourself with the agreement. Think about your current position:
- Does the lease support your practice strategy and day-to-day functions, or is it impeding them?
- Does the lease provide you with the flexibility to grow, bring in associates, expand your services, or offer extended hours?
- Does the lease allow you to terminate the agreement in the event you become disabled and cannot work?
- Does the lease permit a smooth and profitable practice sale, or does it entitle the landlord to proceeds of that sale, or control over who you may transfer the lease?
- Upon practice exit, will you be held financially responsible for gutting and renovating the space, and restoring it to your landlord’s specifications (pre-dental office condition)?
Problematic clauses should be the first provisions addressed and revised when you begin renegotiating your terms; and if the lease isn’t working for you now, it definitely won’t work for you next year or five years from now, let alone when the time comes to transition.
3) Expect delays: Another reason to give yourself plenty of time? Landlords aren’t all villains, but they do have their own agenda, and they are looking to maximize profits and minimize their accountability. They may try to stall or delay negotiations to purposely make you miss the renewal deadline. If you’re aware of this going into negotiations, you can anticipate these tactics and push hard for timelines to be met.
The surest way to end up with a favorable lease is to work with a skilled lease negotiator. They’ll take the guesswork out of the process, and after an initial assessment to understand your operations, needs, and goals, you can sit back and know that your practice and lease renewal is in expert hands.
Alain Sabbah is a principal at Cirrus Consulting Group, a firm devoted to providing office lease negotiation and review services for dentists. Alain has extensive experience in commercial real estate consulting, focusing on dental tenant representation. He can be reached by emailing firstname.lastname@example.org or by calling 1.800.459.3413.