The Hidden Costs of Bad Dental Practice Leases
Special Lease Feature by Lewis Gelmon

Dentists are shocked when I tell them that you don’t really sell your practice; you sell your lease. This simple but disturbing reality has become evident to me from the thousands of leases I have reviewed for dentists since 1994.

Dentists spend decades building good will and providing excellent dental care. They spend hundreds of thousands of dollars on marketing, state-of-the-art equipment, and creating a comforting environment for patients and staff. Unfortunately, all the money, time and effort spent does not necessarily translate into a high sale price.

How can a dentist avoid that unfortunate fate? With a proper office lease agreement that has been carefully crafted for a dentist planning to sell his or her practice.

Over the years, I have been invited to speak at dental conferences (like the Greater New York Dental Meeting, the Pacific Dental Conference and countless local dental societies and association meetings) on this subject. However, my mission is still far from complete.

It seems that more and more dentists are finding themselves caught in a classic landlord trap. I receive one or more phone calls each week from dentists across the country who are in the process of selling their practice but have run into problems with their landlords. These calls all tend to sound the same.

The dentist sounds stressed on the phone. He explains that he has tentatively sold his practice. When he approached the landlord to assign the lease to the new owner, the landlord asked for a letter formally requesting the transfer of the lease to the new dentist. A few days after sending the letter, the landlord called. After reviewing the lease agreement, the landlord has determined that he now has the right to terminate the lease and remove the original dentist from the premises.

The landlord goes on to explain the dentist’s choices. He can give the space back and vacate the premises as promised in accordance with the lease. Alternatively, he can pay the landlord a fee for agreeing to waive the right to exercise their option to terminate, allowing the dentist to remain on the premises and sell the practice. Depending on location and the value of the sale, this fee is usually somewhere between $75,000 and $250,000.

Take a moment to process that: It can cost a dentist up to a quarter of a million dollars to transfer their lease. I’ll bet you didn’t know that, huh?

Property owners often understand the business of dentistry better than dentists themselves. In fact, many landlords pride themselves on such business practices as a way to share in the sale proceeds of their most valuable professional tenants. Buried deep in the lease agreement is an “Assignment Provision” that governs the details of how to transfer the lease (change of control) when selling the practice. These provisions are often extensive and hard to understand. Most allow the landlord overwhelming control over who you can sell, as well as the opportunity to prevent the sale or terminate the lease. In my opinion, the purpose of these onerous sections is simply to provide property owners with the opportunity to share in the sale proceeds of your practice when you sell.

But do you really want your landlord to make a hefty profit from the sale of your dental practice?

The solution is simple. I like the over-used but very true axiom, “An ounce of prevention is worth a pound of cure.” If you ever plan to sell your practice, you need to make sure you can first sell your lease. This requires knowing where the risks are before putting your practice up for sale. Given that there are other potential problems, the best thing you can do is to have your lease properly reviewed to ensure it’s structured correctly for sale and follows good leasing guidelines for dental offices.

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Looking for more information on the topic? You can reach Lewis Gelmon at (760) 479-9704 or lewis@lewisgelmon.com. For only $495, he will personally review your lease. Plus, get a $200 discount until October 31 just for mentioning The Wealthy Dentist. All reviews are guaranteed. If you don’t feel you have received the value, he’ll give you a full refund, no questions asked.

Lewis Gelmon is a former landlord, lease negotiator, and shopping center manager. Now a dental tenant advocate, he regularly lectures for dental groups across North America and the UK. He is the most published author on the subject of dental lease negotiations. His Good Leasing Guidelines for Dentists have been critically acclaimed by numerous dental groups. His mission is to raise awareness among dentists on the risks hidden in their office leases.