Can Your Landlord Relocate Your Dental Practice?July 4, 2016 | Category Practice Management
By Jeremy D. Behar, President & CEO, Cirrus Consulting Group
Picture this. You’ve built or bought your dream dental practice, amassed a loyal patient roster, and are enjoying the fruits of a successful dental practice. Having found a space that works for your business, you feel lulled into a sense of security by what you thought was a good and solid dental office lease.
Suddenly, without warning, you receive notice from your landlord that the dental practice you have worked so hard to build is being relocated to another location to make room for the accountant next door who is expanding. You realize that the office lease you thought was designed to protect your interests, is actually riddled with clauses that the landlord can exploit to their advantage — in this case it’s the “relocation clause”. So, what does this mean for you and your practice?
What is the “relocation clause”?
To start with, the relocation clause gives your landlord the right to relocate your dental practice to another location in the center or building. Landlords generally exercise this right when they have a tenant interested in expanding into the space or are willing to pay higher rental rates.
A more attractive or lucrative offer may give incentive for a landlord to invoke the relocation clause and request that current tenants vacate their space – with typically 30 days’ notice – and move to a new location. As dental practices are expensive to maintain and difficult to relocate, a hidden relocation clause can pose major problems for a tenant. In fact, relocation can easily add up to hundreds of thousands of dollars in unexpected costs.
The most effective way to avoid an unexpected relocation is by identifying this clause in advance, and negotiating it out of your lease before you sign it. If it cannot be removed, often it can often be re-drafted in a way that is more favorable to the tenant.
Can’t remove it? Improve it
The best defense is a good offense, and with a planned, strategic approach, often the terms of your dental office lease can be renegotiated with your landlord. Consider some of these remedies to altering a relocation clause in your favor:
Landlord is Responsible for All Expenses: Negotiate the terms of the clause so that the landlord becomes responsible for all costs associated with the move, including marketing materials and stationary, moving expenses by trained dental movers, demolition, renovation, and the build-out of the new space. Put the onus on the landlord to conform the space to your needs, not the other way around.
Rent Abatement: Ensure you will pay the same or comparable rent in the new location.
Comparable Location: Add language that will ensure the new premises will be comparable with the original space in terms of size, configuration, view, and foot traffic.
Sufficient Notice: Demand a sufficient notice period in order to adequately prepare your staff, patient roster, and build-out of the new space to avoid any practice downtime until the new location is ready.
Limit the Number of Relocations: Because landlords can exercise their right to relocate you indefinitely, negotiate the language so you can only be relocated once during your term.
Lease Termination Rights: Finally, try to negotiate your option to terminate the lease should the landlord relocate you to a less-than-adequate location.
Better yet, avoid the problem altogether
Starting or buying a dental practice is always exciting, but before you break out the bubbly and sign your name on the dotted line, it’s imperative to conduct a thorough review of the details in your dental office lease. A dental office leasing professional can vet out any hard-to-spot risks like the relocation clause in the lease, and devise an appropriate lease negotiation strategy to improve the terms of your lease agreement before it’s too late.
A strong lease can set you up for success by offering security and long-term practice location protection so that you can focus on practicing dentistry without having to worry about packing up your business down the line. To learn more, request a free lease consultation.