Five Lease Traps Landlords Set For Dentists (And How To Get Out) Guide

By: Nick Zagar | CEO & Managing Director of Mirlo Real Estate Partners

After years of being a landlord’s agent, I know the traps landlords set for tenants. First, don’t sign a quick, on-page lease renewal. Be proactive and allow yourself enough time to truly seek out an alternative option before you negotiate your lease renewal. Next, don’t accept boilerplate lease terms for the Assignment, Relocation, and Restoration clauses. These are written for accounting offices, not dentists. Additionally, don’t accept an “office-standard” Tenant Improvement Allowance of $40.00/PSF. You aren’t just a regular office tenant, and this will not be enough. Instead, negotiate a delivery condition to receive the premises, THEN use the TIA after. Lastly, pay attention to the lease type, and if you can’t avoid a triple net lease, set parameters on the operating expenses.

Since 2005, I’ve successfully negotiated over 1,000 commercial real estate transactions, and for nearly a decade, I’ve focused on representing healthcare practice owners. Dentists, veterinarians, optometrists, therapists, you name it, these are my clients in Southeast Michigan.

 

Before founding Mirlo, I spent years on the landlord’s side of the table. I ran the commercial brokerage arm of Oxford Companies in Ann Arbor and watched leases get built across a 2.9 million square foot portfolio. That job taught me one thing about dentists that most dentists don’t know about themselves.

 

You are the tenant every landlord wants.

 

Dentists almost never default, dentists sign 10-year lease terms, and dentists spend hundreds of thousands of their own money on their spaces. Once that plumbing goes into the landlord’s slab, dentists don’t want to leave, and the landlord knows it.

 

I created this guide to help dentists protect their practices. Below are the five clauses that do the most damage to dental practices, why the landlord wants to put them in the lease agreement, and exactly what to change. None of these are exotic and most are even boilerplate. That is what makes them so dangerous.

 

Five Lease Traps for Dentists:

 

Trap 1: The Friendly Renewal Letter

The Mistake
Your lease expires in 12 months, so the landlord sends over a one-page extension. Same space, modest rent increases, just sign here.

The Landlord Hope
You sign it, because moving sounds worse. The landlord can just move onto their next lease expiration.
A lease renewal is the best deal for a landlord. (See our video, “Why Landlords Love Lease Renewals”). In short, lease renewals give them no vacancy, no buildout, no commission, and no capital. And when the landlord senses you have no plan to leave, the terms on that one-page lease renewal have nothing to do with the market. The landlord knows you’ll accept whatever they offer, just so you don’t have to move a four to six-operatory practice.

What To Do Instead
Never negotiate a lease renewal without a real alternative. This needs to be a space you toured, priced out, and would actually consider moving into if you had to.
We especially see this dilemma with inherited leases. A dentist buys a practice, takes over the lease that comes with it, and the landlord assumes the renewal is just a formality. However, when the dentist shows up to the conversation with a priced out relocation option and timeline, they will have a very different discussion – one with real leverage. All of a sudden, the rent gets reset, a Tenant Improvement Allowance (TIA) appears, renewal options are added, and sometimes, the entire lease structure gets rebuilt. None of that would be on the table if the dentist felt they were stuck.

In summary, this is the renewal rule. You have no negotiation leverage at a lease renewal until the landlord believes you are willing to leave. The word believes is key – not suspects.
Additionally, I want to point out that timing is important here. Do not wait for the landlord to start the lease renewal conversation. Be proactive and start this process 18-24 months out. That’s how long a credible alternative takes to build, and the landlord can tell the difference between a plan and a threat.

 

Trap 2: Relocation and Restoration, Two Clauses Nobody Reads

The Mistake
When receiving the lease, you skim past “Relocation” and “Surrender of Premises,” because they’re near the back, and they look boilerplate. They are, and that’s the problem.

The Landlord Hope
Boilerplate lease clauses are written in the landlord’s favor by nature. And the landlord knows this and hopes you just agree to as much as possible, not understanding which terms to fight for. (Side note, this is why hiring a real estate attorney, specifically, is so important!) But here is the issue with boilerplate lease language for these two clauses for dentists:

The relocation clause gives the landlord the right to move you to another suite on 60-90 days’ notice, because a bigger tenant wants your space. For an accounting firm, that’s an inconvenience. For a dentist, it’s an expensive second buildout in the middle of the term, while potentially losing patients.

The restoration clause requires that the tenant strips their improvements at the end of the lease term. Again, an accounting office isn’t trenching into the slab to install medical plumbing, so this may seem reasonable to a standard office tenant. For a dentist, not so much.

What To Do Instead
Luckily, you don’t have to accept the boilerplate lease language meant for standard office space users.

You can strike the relocation clause. A clinical practice cannot be moved at the landlord’s convenience. If the landlord insists the clause stays, it should only stay with a termination right at your option with a buyout that covers your buildout and lost production. With that, you’ll be protected.

Rewrite the restoration clause. Change the surrender language to “in good condition, ordinary wear and tear expected,” including a sentence that states the tenant is not required to remove clinical plumbing, mechanical, shielding, or fixed cabinetry. The next dentist will want all that infrastructure anyway, and so does the landlord once you point it out.

 

Trap 3: The Assignment Clause that Follows You Out the Door

The Mistake
You plan to sell your practice in 7-10 years, so you overlook the assignment and subletting sections. After all, your sale feels far away.

The Landlord Hope
You don’t give the assignment clause as much attention as it deserves. Landlords write their assignment clauses to protect credit. They know you are a credit-worthy tenant, and they won’t just lease to anyone. This is fair, but the standard version of the assignment clause often goes further. The landlord likes to put in there:

1. 1. • The landlord has “sole discretion” over any transfer.
      • Some of the profit tied to the real estate belongs to the landlord with a practice sale.
      • The landlord will demand a personal guarantee from the buyer AND keep yours in place for the rest of the lease term.
      • A sale to a corporate entity or DSO will not be approved for a lease assignment unless the rent increases.
      • An assignment request can trigger the recapture clause, meaning the buyer will have a practice with no space.

The landlord’s attorney will say most of this language is “standard”. It is, but that doesn’t make it yours.

What To Do Instead
Negotiate permitted transfers now, while the landlord wants you to be their tenant. The lease should specifically say that assignment to a qualified buyer, associate, or DSO does not require discretionary landlord consent, provided the buyer meets a stated threshold, such as net worth and years in practice. Strike any recapture language on any assignment to a practice buyer.
Also, be sure to include an automatic release of your personal guarantee on a practice sale. If the landlord won’t release it outright, put a burn-off period on it. This means the personal guarantee falls away after a set number of months of the buyer paying on time.

 

Trap 4: The “Generous” Tenant Improvement Allowance

The Mistake
The landlord offers $40 per square foot in TIA. It sounds like a lot, and you build your budget around it.

The Landlord Hope
In traditional office leasing, $40 per square foot in TIA covers new carpet, paint, some drywall, and a drop ceiling. That’s the world the number comes from, and the landlord hopes you’ll just accept it, because you don’t know what else to do. However, a dental buildout requires $150-250+ per square foot, because you are paying for things an accounting office never needs:

1. 1. • Trenching the slab for air, water, and suction lines
      • Three-phase electrical
      • HVAC to handle clinical air exchange
      • Lead shielding for pan and CBCT

In other words, a “standard” allowance quietly moves to six figures of capital from the landlord’s side of the ledger to yours. This is just the reality.

What To Do Instead
Separate the base building from your buildout at the Letter Of Intent stage, before the lease is ever drafted. Require the landlord to deliver the space with utility stubs, adequate amperage, and HVAC to the premises already in place. Then, apply the TIA on top of that delivery condition. This will preserve your TIA for your actual buildout.
Additionally, you can ask for free rent through construction, so you aren’t paying rent on a space that can’t see patients yet. Every dollar of delivery condition you win is a dollar you don’t have to borrow.

 

Trap 5: Triple Net and What “Net” is Actually Netting

The Mistake
During your space search, you compare two spaces on base rent. One is $22 per square foot, and the other is $26 per square foot. You go with the $22 per square foot option and feel good about saving money.

The Landlord Hope
Landlords are hoping you don’t pay attention to the acronym next to the base rent price. This is because those letters represent the lease type, and the lease type is actually very important to your budget. (For more, see our video, “Understanding Commercial Real Estate Leases (And How To Avoid Getting Screwed)”).
Simply put, the lease type determines how much more money you’re paying on top of the base rent, and landlords prefer triple net (NNN) leases. This lease type pushes every operating risk in the building onto the tenants. Under a NNN lease, the tenant pays the base rent plus your share of property taxes, building insurance, and Common Area Maintenance (CAM). And the reason why landlords like billing these expenses outside of the base rent is because the base rent schedule has already been set, but the operating costs have not. So, if the property sells and gets reassessed, your tax charge jumps. If it’s a snowy year, the snow plowing in the CAM charge goes up. And with a NNN lease, the landlord isn’t covering these increases – you are.

What To Do Instead
Ideally, you could ask for a Modified Gross lease instead, where the three nets are built into the base rent price. However, it is unlikely you’ll succeed with that request. So instead, you can steer your focus on building guardrails around the terms of these charges. I recommend these three:

1. 1. • Cap controlled expenses. A 3-5% annual cumulative cap on the costs the landlord actually controls, such as the management fees or landscaping. Taxes and insurance usually stay uncapped, but controllables should not.
      • Audit rights. This allows you to review the landlord’s books once a year. If expenses were overstated by more than a stated percentage, the landlord pays for the audit.
      • Exclude capital expenditures. Roof replacement and parking lot repaving are landlord capital, not CAM. I suggest listing these excluded expenditures in writing, because the boilerplate lease will say the opposite.

 

What do all five of these traps have in common? Every one is negotiable. But none of them will change just because you ask nicely. They change when you show up with a plan and a real willingness to walk.

 

That’s the whole game from the landlord’s side. The tenant who is prepared and educated gets a different lease than the tenant who isn’t, and no one at the landlord’s office is going to tell you which one you are.

 

 

FAQs:

 

• My lease is up in a year, and the landlord sent a simple renewal. Why not just sign it?
  Because the rent and terms reflect what the landlord thinks you’ll accept, not what the market says. Do your research, and build a real relocation alternative first, then negotiate.
• How can a lease clause hurt my practice sale?
  Typical boilerplate lease language for the assignment clause lets the landlord refuse your buyer, raise the rent as a condition, keep your personal guarantee in place, or terminate the lease when you ask to assign. At minimum, negotiate permitted transfers and a guarantee release before you sign.
• Is $40 per square foot enough for a Tenant Improvement Allowance for a dental buildout?
  No. That figure comes from office leasing to cover new carpet, paint, and other small adjustments. Dental buildouts cost several times that, because they require slab plumbing, electrical, HVAC, and shielding. Negotiate the delivery condition, in which the tenant receives the premises, first, then the TIA can be applied after.
• What is the difference between triple net (NNN) and modified gross (MG)?
  A triple net lease passes the property taxes, insurance, and Common Area Maintenance (CAM) to you on top of the base rent (and with no ceiling). Modified gross leases build most of those costs into a fixed price. If you have to take a NNN, cap controllable expenses, get audit rights, and exclude capital expenditures.
• What are relocation and restoration clauses?
  Relocation lets the landlord move you to another suite in the middle of your lease term. Restoration makes you tear out your buildout when you move out. Strike the first and rewrite the second to say your clinical infrastructure stays.

 

Southeast Michigan Healthcare Submarket Update 2026

Before I get into the submarkets, I want to point out a trend we are seeing for buyers:  former bank branches on busy roads. These are very popular with our dental and veterinary clients for a few reasons:

 

1. Signage- banks are built for visibility in high traffic areas. They already have large existing monument and facade signage – better than most multi-tenant buildings – along with the benefit of inheriting those signage rights.
2. Accessibility- these are single-story, ADA-compliant buildings with ground-floor entries and no shared lobbies. This is the ideal set-up for any healthcare office, because it is easier on patients, especially those with mobility challenges.
3. Parking- banks have a typical parking ratio of 5-8 spaces per 1,000 SF, and that is generous for a medical or dental practice. Healthcare use requires a lot of parking per zoning requirements, but a former bank will put you in the clear.
4. Pricing- believe it or not, but we’re finding we can get these buildings at a good price. With banks consolidating, they’re wanting to release the real estate at attractive market cap rates.

 

• Ann Arbor (Washtenaw County) is tight. The leased medical office space vacancy is under 6% in most clusters. This comes with landlords being very firm on base rent, but a little more flexible on Tenant Improvement Allowance (TIA) for long-term tenants, which healthcare tenants are. The toughest spots are:  Plymouth Road, State Street, and the South Industrial Corridor. Buying is even harder in this market and requires patience for that rare find. If you’re willing to go out to Dexter, Chelsea, or Saline, you’ll find better pricing.
• Northville/Novi/Plymouth is very actively constructing medical office space, but you’ll pay for it. Leasing is probably easier with landlords acting more competitively and higher TIA is achievable, whereas buying will price you at $400-600+ per square foot for a built-to-suit. If you’re price sensitive, look one ring out.
• Birmingham/Bloomfield has premium pricing for their strong patient demographics for both leasing and buying. You’re going to find aggressive landlords who want high base rents and offer lower TIA packages compared to other areas. And for owner-occupied opportunities, move fast or lose it, and expect to pay $400-650 per square foot.
• Royal Oak/Berkley/Ferndale is a great choice for growing and younger practices. It offers a younger demographic and makes for an easier startup market. For buying, there’s more available stock at around $300-450 per square foot, and for leasing, there’s more flexible landlords than Birmingham but a tighter market than Northville.
• Rochester Hills/Troy has a well-established medical office market with well-established landlords who’ve been in the industry for generations. This means it’s common to find relationships matter more here than just the economics, and there are no one-size-fits-all rules for both leasing and buying. Purchase prices here are around $325-475 per square foot.
• Warren/Sterling Heights/Shelby Township/Clinton Township (Macomb County) is very active for owner-occupant buildings, especially with former bank buildings. This submarket is very underrated, in our opinion. It is less dense, but that is part of the appeal. You get more for your money with less competition. We’re seeing buildings sell for $200-350 per square foot.
• Dearborn/Dearborn Heights, we’re finding, is very tough for buyers. Properties are going for well-above asking prices. You’ll have an easier time moving further to the west in Wayne County or plan to be patient.
• Canton/Livonia/Westland (Western Wayne County) behaves more like Oakland County with buying, but its landlords are more flexible. Some of the best base rents and TIA are achievable here, which is the most attractive for startups. Landlords are also offering more favorable terms for lease renewals here.
• Detroit Core has a different playbook than the suburbs, because the market is mostly controlled by the large hospital systems. This means the lease terms are more standardized with not as much room for negotiation. If you’re buying, you’ll find some of the friendliest pricing at $250-375 per square foot, which is a good value for buyers who want suburban density without the Oakland County premium price tag.

 

Talk To Us

Real estate is a top expense for a dental practice, and you can’t afford a bad deal. Be proactive, educate yourself, and hire professionals to fight for your best interest. Set up a 30-minute call to go over your situation. We guide you in the right direction.