If you’re buying a dental practice in the St. Louis area—or anywhere else—you’ll need a lease from the building owner (your landlord). And here’s the truth: almost everything in a standard lease benefits the landlord.
Some landlords are easy to work with. Many are not. Over the years, we’ve found that the “difficult” ones tend to dominate the landscape.
That doesn’t mean you’re powerless, but it does mean you need to know what you’re signing. Here are the key areas to pay attention to:
1. Term of Lease
Your banker will want a long enough lease to protect their financing, and you’ll want stability since relocating a dental office is extremely expensive. Look for a solid initial term plus options to renew.
2. Rent Increases
How and when rent goes up matters. In most leases, increases are tied to the cost of living or another index. Have your accountant or attorney review the formula to ensure it’s reasonable.
3. NET, Double NET, or Triple NET?
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NET = you pay base rent + property taxes
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NET NET = base rent + taxes + insurance
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NET NET NET (Triple Net) = base rent + taxes + insurance + maintenance
Know exactly what you’ll be responsible for and when payments are due.
4. Utilities & Maintenance
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Some leases include certain utilities (like water), but many do not.
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If you have your own HVAC unit, you’ll likely be responsible for maintenance, repairs, and even replacement. Factor that cost in.
5. Insurance Requirements
Most leases require you to carry liability insurance. Confirm the amount and make sure it’s practical.
6. Termination Clauses (Death or Disability)
Few landlords will include this, but it’s worth negotiating. Ideally, you want a clause that allows you—or your estate—to exit the lease in these situations, even if it requires a termination penalty.
7. Assignability of Lease
When it comes time to sell your practice, you’ll need the ability to assign the lease to a buyer. The lease should require landlord approval but state that such approval cannot be unreasonably withheld. This phrase is crucial and not always included.
8. Damage or Destruction of the Building
If the building is destroyed (fire, storm, etc.), how long does the landlord have to rebuild? Many leases allow 6 months or more before they have to decide. For a dental office, that’s far too long. Negotiate a shorter timeframe and secure business interruption insurance to protect yourself.
Bottom Line
Leases are dense, landlord-friendly documents—but they can determine the success or failure of your practice. Go in with your eyes open, know where you can negotiate, and protect your long-term investment.
We’ve been helping dentists navigate these lease issues for more than 40 years. If you’re considering buying or selling a dental practice, let us guide you through the process.
– Bill Otten & Kim Rey
