Dentists, have an experienced team of proven dental real estate advisors on your team before entering into a lease. Don’t “wing it” it’s a huge investment – do it right the first time!
Let’s be clear and complete about what and who is needed before entering into a dental lease. Any dentist contemplating practice ownership should have an experienced group of dental-specific professionals on his/her team i.e., CPA, Real Estate Broker, Attorney, Architect, Space Planner, Equipment and Furniture supplier, and so on.
In addressing the function of dental real estate advisors, it is within their job duties to do three things:
1.Locate space that is viable within the local market that conforms to the dentist’s specifications. Different specialties within the dental practitioner’s framework will dictate what type of location will be the most profitable for the dental tenant. Study the 17 key area demographics. Once favorable demographics have been determined, study the 9 “location logistics” key factors within the determined demographical area. Pinpointing the ideal location to maximize market opportunity is the first step in establishing a thriving practice. Location is a key factor in profitability.
Some real estate brokers include location finding in their services, some don’t. Sometimes, the prospective dental tenant will choose his or her location, and after careful scrutiny by the help of a seasoned tenant broker, may rethink the choice and end up in a location that was even better than the initial location.
2. Negotiate the economics offered by the landlord. It’s typically the lease rate, free rent, and the tenant build-out allowance. But, beware, there are many other conditions within a lease that can be very costly to the tenant. These items must be addressed after the Economics (Letter of Intent) have been agreed upon, in preparation for the full-on lease negotiation.
Economics are very important, but in the whole scheme of the real estate portion of practice ownership, they are a tip of the iceberg, when considering the entire concept of business protection within a dental lease. This is 100% different from the legal function of a lease.
Some real estate professionals limit their services to strictly negotiating economics.
3. Negotiate a lease with dental-protective stipulations that shift hidden business risk away from the dental tenant. Hidden – because many business risks are not recognized by general commercial real estate brokers who are unaware of the far-reaching implications that directly relate to practice profitability. They don’t know the dental real estate business and don’t understand the tenant’s heightened needs for business protection.
It is the job of the commercial real estate broker to negotiate tenant-protective stipulations throughout the entire business function of the dental lease.
Attorneys, by and large, do not negotiate for protective business stipulations, as their role is to review the lease for validity and enforceability.
Dental tenants need both types of representation in a lease – business and legal.
Selection of the type of real estate services is up to each individual tenant.
Some want two, three, or even four providers during the real estate procurement process.
Here’s what real estate law has to say about that thought process: If a tenant does not appoint, in writing, an exclusive real estate broker for representation during the real estate procurement process, the tenant has no real estate representation and does not have the protections of a fiduciary relationship with an appointed broker.
With no written exclusive tenant-representative appointment, any and all real estate representatives’ fiduciary responsibilities are to the landlord.
That’s why it’s so critical for any tenant to have Exclusive real estate brokerage representation, especially the dental tenant who needs a much higher level of business protection within the lease.