Dental and Medical Counsel Blog

Renegotiating Your Dental Practice Lease: What to Consider Before Signing

September 9, 2023
Dental Lease

Lease negotiation can be a critical and often overlooked aspect of managing a dental practice. With long-term implications for both the financial health and operational capabilities of your practice, it's vital to consider several factors before signing on the dotted line. The decision to renew a lease is more than just a financial commitment; it's also a strategic choice that can influence your practice's growth and success for years to come.

There are several key factors you need to consider before you decide to renew your lease. At DM Counsel, we are here to help you decide on the right path to meet your needs, so learn more about the key questions you need to ask. Then, reach out to us if you need help with various aspects of your dental practice lease. 

Are You Getting the Option To Renew Your Lease From the Landlord?

When approaching the end of your current lease term, the first consideration is whether your landlord is offering the option to renew. This option gives you the right to extend your lease under pre-defined terms, providing a level of security and stability for your dental practice. The terms of renewal, including the duration and rental rate, should be reviewed carefully to ensure they align with your business plans.

It's important to remember that the terms in the renewal clause are typically negotiable. You may want to negotiate for more favorable terms based on your practice's needs, market conditions, or your relationship with the landlord. Before accepting the renewal option, consult with a commercial real estate professional or an attorney to make sure the terms are fair and serve your business interests well. Remember that there are some situations where the landlord might decide to sell the property instead, so you should be prepared with other options if you go to the negotiating table. 

Is Your Space Big Enough?

Another key consideration when renewing your lease is the size of your practice. As your practice grows, you may need more space to accommodate additional patients, more equipment, or additional staff. Consider whether the current premises will continue to be adequate for your projected growth.

On the other hand, if you find that your space utilization is low, downsizing might be an option. Underutilized space can represent unnecessary costs for your practice. The lease renewal time is an excellent opportunity to assess your space needs and make necessary adjustments. Remember that an optimal space can enhance patient experience and operational efficiency. You do not want a space that is too large or too small. 

Is the Rental Rate Going Up?

Rental rate increases are a common issue when renewing a lease. Landlords often build annual increases into their lease agreements to account for inflation and increased property values. If the proposed rental rate seems too high, it's crucial to do some market research to determine if it's competitive with similar properties in your area.

You should also consider your practice's financial health and future projections. Can your practice afford the increased rent while maintaining healthy profit margins? If the answer is no, you may need to negotiate the rental rate or consider other locations. Be sure to consider all the factors impacting your bottom line before committing to a higher rental rate.

Is Now the Time for You To Buy Property?

Lease renewals also offer an opportune time to consider whether purchasing a property could be more beneficial for your dental practice in the long run. Owning your own property could provide financial benefits such as building equity, potential appreciation, and possible tax advantages. Additionally, it provides a permanent location for your practice and greater control over the property. Some additional stability might be better for your brand. 

However, buying property also comes with its own set of responsibilities, including maintenance, property taxes, and potentially higher upfront costs. It's also a long-term commitment that might not offer the same flexibility as leasing. Therefore, it's crucial to carefully weigh the pros and cons, considering your practice's financial situation and future plans, before deciding to buy property instead of renewing your lease.

Is the Location Still Good for Your Practice?

Location is a critical factor for any dental practice. A good location can make it easier to attract and retain patients, provide convenient access for your staff, and even influence the perception of your practice. Consider whether your current location is still serving these needs well.

Has the neighborhood changed since you first leased the property? Are there new competitors in the vicinity? Is the area still easily accessible and visible to potential patients? If the location is no longer advantageous, it might be time to consider other options before renewing your lease.

Are You Thinking About Opening a Second Office?

If you're considering expanding your practice to include a second office, this could significantly impact your lease renewal decision. Opening a second office could necessitate financial resources that might affect your ability to afford an increased rent on your current property.

Moreover, the location of your second office in relation to your current one will be an essential consideration. You'll want to ensure they are adequately spaced to attract different patient populations while being close enough for manageable oversight of both locations. If expansion is on the horizon, carefully consider how renewing your current lease fits into these plans.

Do You Need To Move for Family Reasons?

Personal or family reasons might necessitate a move, impacting your decision to renew your lease. Whether it's due to changes in your family's needs, school districts, or simply a desire for a change of scenery, these personal factors are important to consider in your decision-making process.

Although your practice is a significant part of your life, achieving a work-life balance is crucial. If renewing your lease doesn't align with your personal or family needs, it may be worth exploring other locations that could better serve both your professional and personal life.

Has the Landlord Done a Good Job Taking Care of the Property?

Lastly, assess the landlord's management of the property. Are they responsive to maintenance requests? Have they made necessary improvements to the property over time? If you've had a positive experience with the landlord and they have demonstrated their commitment to maintaining the property, this could weigh in favor of renewing the lease.

However, if you've had ongoing issues or disagreements with the landlord, it might be a red flag. In such cases, it could be beneficial to look for a property managed by a more responsive and reliable landlord. You may want to reach out to a professional who can help you decide what is right for your practice. 

Contact DM Counsel With Questions About the Right Location for Your Practice

Renegotiating a lease for your dental practice involves balancing many complex factors. The team at DM Counsel is here to provide expert guidance to help you navigate these decisions, ensuring you make the most beneficial choices for your practice's future.

Reach out to DM Counsel for help in assessing your lease renewal options. Our team can provide advice and support tailored to your practice's unique needs. Don't let leasing complexities hinder your practice's growth – let us assist you in making the best strategic decisions.

Schedule a Complimentary Consultation 

Frequently Asked Questions

Q: Is lease renewal an important decision for my dental practice?

A: Yes, lease renewal has long-term implications for your practice's financial health and operational capabilities. It can influence growth and success for years to come.

Q: Should I consider renewing my lease or explore other options?

A: To make an informed decision, you should consider factors like lease terms, space adequacy, rental rate increases, location advantages, personal needs, and the landlord's management of the property.

Q: Is the option to renew my lease negotiable?

A: Yes, the terms in the renewal clause are typically negotiable. Consult with a commercial real estate professional or attorney to ensure fair terms that serve your business interests.

Q: How do I determine if my current space is sufficient for my practice's growth?

A: Evaluate your projected growth and space utilization. If you need more space or find underutilization, consider renegotiating the lease or exploring other options.

Q: Should I consider buying property instead of renewing the lease?

A: Buying property offers financial benefits but comes with responsibilities. Weigh the pros and cons based on your practice's financial situation and future plans.

Q: How does the location impact my lease renewal decision?

A: A good location attracts patients and influences your practice's perception. Consider changes in the neighborhood, accessibility, and potential competition.

Q: What if I'm considering opening a second office?

A: Expanding to a second office may affect your ability to afford increased rent. Evaluate the location's proximity and patient demographics to make a strategic decision.

Q: How do personal or family reasons impact my decision?

A: Personal and family needs should be considered for work-life balance. If the lease renewal doesn't align with your needs, explore other locations that suit both aspects.

Q: How do I assess the landlord's management of the property?

A: Evaluate the landlord's responsiveness to maintenance requests and improvements made over time. Positive experiences may favor renewing the lease.

Q: How can DM Counsel assist with lease renewal decisions?

A: At DM Counsel, we offer expert guidance to help you make the most beneficial choices for your practice's future. Reach out to us for advice tailored to your unique needs.

At Dental & Medical Counsel, PC, we understand navigating the legal process can be tricky. We believe every doctor deserves the best advice and service so doctors can do what they do best, treat their patients. We make their lives easier by providing expert guidance, so they can focus on their personal and professional aspirations.

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About Ali Oromchian, Esq.

Ali Oromchian, JD, LL.M. is the founding attorney of the Dental & Medical Counsel, PC law firm and is renowned for his expertise in legal matters

In addition to practicing law for almost 20 years, Ali is also a renowned speaker, throughout North America, on topics such as practice transitions, employment law, negotiation strategies, estate planning, and more! Ali has helped hundreds of optometrists realize their professional goals and looks forward to aiding you in navigating the legal landscape. 


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