What Should Your Lease Include to Sell a Dental Practice?

Question from sam, What Should Your Lease Include to Sell a Dental Practice?

Answer from AI:

When planning to rent a property for a dental office with the intention of selling the practice in the future, it’s crucial to ensure that your lease agreement with the landlord includes specific provisions that facilitate this process. Selling a dental practice involves not just the transfer of ownership of the business, but also the assignment of the lease to the new owner. Here are key points to consider including in your contract to ensure a smooth transition:

Assignment and Subletting Clause

Assignment and subletting clauses are essential in any commercial lease agreement when you plan to sell your business. This clause should explicitly allow you to assign the lease to a new owner or sublet the space if necessary. It’s important to negotiate terms that are as flexible as possible, while understanding that the landlord may require certain conditions to be met, such as:

1. Approval of the new tenant’s financial stability and business experience.
2. A possible limitation on the reasons for assignment or subletting.
3. The original tenant (you) may still be held responsible for lease obligations if the new tenant fails to comply.

Option to Renew

Including an option to renew the lease can significantly increase the value of your dental practice to potential buyers. Knowing that they can continue operating in the same location for an extended period can be a strong selling point. This clause should detail how and when the option can be exercised and any changes in lease terms upon renewal, such as rent adjustments.

Right of First Refusal or Purchase Option

If the property itself is something you or a future buyer might be interested in purchasing, negotiating a right of first refusal or a purchase option can be beneficial. This gives you or the subsequent owner the first opportunity to buy the property before the landlord can offer it to others.

Non-Disturbance Agreement

A non-disturbance agreement from the landlord ensures that in the event the property is sold, the new owner will honor your lease terms. This provides stability and security for your practice and any future owner.

Use Clause

Ensure the use clause in your lease is broad enough to encompass all potential services your dental practice might offer, both now and in the future. This prevents any restrictions that could devalue your business or limit the buyer’s ability to expand services.

Termination Rights

Negotiate termination rights that allow you some flexibility in ending the lease if necessary, without incurring excessive penalties. This could be important if you decide to sell the practice and the buyer wishes to relocate the business.

Consult a Professional

It’s highly recommended to consult with a real estate attorney who specializes in commercial leases and has experience with dental or medical office spaces. They can provide personalized advice and ensure that your lease agreement protects your interests and facilitates the future sale of your practice.

Remember, each lease agreement and landlord-tenant relationship is unique. The ability to negotiate favorable terms will depend on various factors, including the location of the property, the real estate market conditions, and the landlord’s preferences.

For more information on commercial leases, you might find the U.S. Small Business Administration’s guide on leasing commercial space helpful.

Note: This information is provided for general guidance purposes and should not be construed as legal advice. Specific lease agreements and legal questions should be discussed with a qualified attorney.