What Should You Negotiate In A Dental Office Lease?

Dental office lease red flags: the clauses that hurt you at sale time

Nobody reads a 60-page lease the way they should. Owners skim for the rent, the term, and the renewal options, sign, and file it away — and the clauses nobody read sit quietly for a decade until the day they matter. And the day they matter most is usually the day you try to sell your practice.

Here are the red flags we and the attorneys we work with look for in healthcare leases — the provisions that read as boilerplate at signing and turn expensive at exit. Several come straight from our Dentelligentsia conversation with DeLone Dawisha, the Principal and Founder of Dawisha Law PLLC, whose firm handles exactly these fights.

Red flag one: an assignment clause that can block your buyer

When you sell your practice, the buyer needs the space — which means the lease has to transfer, which means the assignment clause is silently a term of your sale. Watch for language requiring the new tenant to have “equal or greater” financial strength than you. After twenty years of practice, your financials will beat those of the young associate most likely to buy from you — so the clause hands your landlord a veto over the most natural buyer you have.

Dawisha’s baseline is worth knowing: “Under Michigan law, contracts are freely assignable unless they state otherwise.” Everything restricting assignment was added by the landlord and is negotiable. Aim for consent that can’t be unreasonably withheld, with objective standards a real-world buyer can meet.

Red flag two: an unlimited personal guarantee

A guarantee that runs the full term of a ten-year lease keeps your house on the table for a decade — and can follow you even after an assignment. The fix is to negotiate limits: “If you’re dealing with a 10-year lease, limit the guarantee to two or three years,” Dawisha told us. “If the tenant performs for the first three years, in all likelihood this is a good tenant going forward.” A burn-off provision, a cap on the guaranteed amount, or release upon assignment all shrink the exposure. Landlords agree to these far more often than tenants think to ask.

Red flag three: CAM charges with no audit right

Common area maintenance charges are estimated, billed monthly, and reconciled later — and the definition of what belongs in them is wherever the drafting lawyer left it. Watch for capital expenditures dressed up as maintenance, administrative fees stacked on management fees, and no right to see the books. The audit right is the quiet enforcer: “A landlord who knows the tenant can audit the books is less inclined to add costs they shouldn’t be adding to begin with.” You may never use it. Its existence is the point.

Red flag four: no non-disturbance protection

If your landlord’s lender forecloses, what happens to your lease? Without a non-disturbance agreement, a foreclosing lender can potentially wipe out your tenancy — with your operatories plumbed into the slab. An SNDA (subordination, non-disturbance and attornment agreement) keeps your lease alive through a change in ownership. While you’re at it, treat estoppel certificates with respect when they arrive: you’re typically obligated to sign one, but as Dawisha notes, you’re not obligated to sign one that’s inaccurate. Read every word — it can lock in “facts” about your lease.

Red flag five: the construction terms

Buildout is where most healthcare tenants spend the most money, and in Dawisha’s practice it’s where the disputes live: “Out of everything I’ve handled, construction projects are where most of the issues come up.” Delivery condition, tenant improvement allowance mechanics, who pays for what when surprises appear behind the walls, deadlines and remedies when the landlord’s work runs late — vague language in any of these becomes a five- or six-figure argument.

The pattern underneath

Notice what these have in common: none of them show up in the rent number. Two leases at identical rates can be tens of thousands of dollars apart in real cost and — through assignment and guarantee terms — six figures apart in what your practice fetches at sale. The rent is the visible price; the clauses are the hidden one.

Two closing pieces of Dawisha’s advice. Use a specialist — “if you’re dealing with a commercial real estate issue, you want a lawyer who does commercial real estate day in and day out,” not the cousin who passed the bar. And reframe the fee: professionals are an asset, and what you spend up front is a fraction of what the unread clause costs later.

Hear the full conversation with DeLone Dawisha of Dawisha Law on the Dentelligentsia podcast — including the operating agreement every practice entity needs, even solo owners.

Our role comes before the lawyer’s: building the leverage and negotiating the business terms so the draft your attorney marks up is already tilted your way. Tenants and buyers only — talk to us.

For more on our interview with DeLone Dawisha, check out our article, “What Should You Negotiate In A Dental Office Lease? An Attorney On The Clauses That Matter.”

And follow DeLone Dawisha on Linked In or check out the Dawisha Law website.