If you missed Part 1 of this 3-part mini-series you can read it here It shares thoughtful insight and should be read before Part 2.
Dentists
who are considering opening a new office will most likely look at the option of leasing. After reviewing many leases, my team has found a
few sure-fire ways to FAIL in the dental real estate lease game. Read
below to learn about one of the scariest lease clauses in the country.
The Scariest Clause…Confession of Judgement
I was one of those kids who cried on the lap of Santa Clause.
I admit it!
But now I cry on the lap of a “different” kind of clause…
The Confession of Judgement Clause.
This
one concept is so potently in favor of landlords that there are only a
handful of states in the country who still allow the clause to be used
in a dental real estate lease.
The concept behind a “Confession of Judgment” clause essentially goes like this:
…you’re guilty if the landlord says you are.
I’ve helped review dental real estate leases on commercial space in many states 
across
the country and this one clause is the scariest of all. Found blended
in between a hodge podge of legalese somewhere in the middle of the
lease is wording that legally has you “confess” to any future “judgement” that the landlord brings against you.
In other words, if the landlord takes you up in court, you’ve already agreed you’re guilty.
You’ve effectively “confessed” a “judgement” against yourself.
In a dental real estate lease, confessing your “guiltiness” would imply you’ve broken the terms of your lease.
The cost to you as a tenant?
In most cases, the entire amount of the remainder of the lease then becomes due immediately.
In other words, if you pay $3,000 per month in rent and you have 20 months remaining, you would owe $60,000 immediately.
And you have to move out.
All because you confessed judgement by signing the lease.
I
hope this concept sounds impossibly unfair to you…if it does, you
understand the crushing power against you as a tenant in the building.
But believe me when I tell you, this is not impossible – it happens
everyday in multiple states around the country.
Why Landlords Do This
The next question to ask is: would a landlord really exercise his “Confession of Judgement” clause?
Perhaps.
But landlords don’t want a bunch of guilty, broke tenants strewn around
town like carcasses after a massacre. What landlords want is tenants
who pay…tenants who make him a profit.
In
that vein of thought, consider what might happen if the landlord needs
to exert some leverage at a time in when his firm is in need of some
untapped revenue? Could the confession of judgment clause be useful to
him? Imagine what could happen if you were leasing from a landlord who
could exert that kind of financial pressure on you. What would happen to
your practice or your family’s finances if a landlord exerted the
powers he had in a lease like that?
I hope you can sense the grave dilemma. I hope this sounds like a big problem.
Please
don’t turn a blind eye to this – the world of commercial real estate
can be financially deadly and the confession of judgment clause is one
of the worst tools used against tenants.
We don’t want our clients to end up like confession of judgment carcasses!
Never Forget
So never forget the Clause…not the “Santa” Clause… the Confession of Judgment Clause.
As
you look to open your practice and set yourself up for financial
success, bring in the right resources who can guide you in the topic of a
dental real estate lease.
By Jayme Amos
Disclaimer: I’m not an attorney and none of this is to be considered legal advice. Consult an attorney in your state to discuss legal matters.
Jayme and his team have helped hundreds of dental professionals pursue their goals. Now you can learn from the best in the dental industry.
Click here to discover more practice-defining tips for your new or existing practice:
www.HowToOpenADentalOffice.com
View the original article here.