The Role of the Landlord in a Practice Sale | Dental Practice Brokers
Dental Practice Sales & Transitions
Before you purchase or sell a practice, remember that there is sometimes a third party involved: the property owner. Whether the practice is in a freestanding building, in an office park, or shopping center, your transition might involve the landlord.
What You Need to Know About Buying a Dental Practice
If you are buying a practice with a third-party landlord, review your lease with an eye toward creating an exit strategy. The landlord might request payment for the rest of the lease if you leave early or demand a portion of sales profit. When drawing up a contract, consider whether you want to include an option to buy the physical space in the future.
If the selling dentist is also the landlord, create a written employment contract which specifies how long the seller will work at the practice after the sale. Conventional wisdom limits the time the seller stays on, so as not to cause a disruption. Of course, there are exceptions, but it is important to spell out employment-related details and avoid misunderstanding.
Finally, when entering into a lease agreement, ensure you are leasing without a personal guarantee. At the very least, specify all exclusions and limitations.
What to Negotiate when Selling a Dental Practice
Among the most important issues to consider when selling a dental practice is the language contained in the assignment clause. It delineates which parts of a contract can be transferred to another party. It can also entitle a landlord to a hefty percentage of profits, so read carefully.
Effective agreements spell out both parties’ responsibilities and obligations, including future lease rates. Many dentists discover language in the leasing portion of an agreement that can delay the sale, or allow the landlord to change a lease without notice at any time.
Address the percentage to which your landlord will be entitled from the sale. When considering an exit clause, determine whether you are required to return the space to its pre-build out condition. Not specifying this in the lease could cost you thousands of dollars to restore the space to the landlord’s satisfaction.
It is important to address every detail well in advance of your purchase or sale. No matter which side you’re on, our dental brokerage practice will exclusively represent you and help you navigate the process to your advantages. Get in contact with our Baltimore Dental Brokerage team.