Selling your dental practice is a major decision — one that involves more than just patient charts and equipment. One of the most overlooked yet critical factors in a successful dental transition is your office lease agreement. Renewing or extending a lease without understanding the potential consequences can lead to financial liabilities, reduced sale value, or even a failed sale.
BEFORE YOU SIGN ANYTHING, HERE ARE SOME THINGS YOU NEED TO KNOW:
Common Dental Lease Pitfalls to Watch For:
1. Personal Guarantees That Outlive the Sale
Many dental leases contain personal guarantees that remain in effect even after the practice is sold. This means if your buyer defaults on the lease, you could be held financially responsible — even if you're no longer practicing there. Don’t assume the sale releases you from liability. One of our Cornerstone Dental Transition analysts, who is also a practice owner, experienced this firsthand and was locked into a lease for 15+years after the sale.
2. Assignment Clauses That Can Block a Sale
Assignment clauses dictate whether (and how) you can transfer the lease to another dentist. Some clauses:
- Require landlord approval (which can be withheld for any reason)
- Impose strict conditions or fees
- Grant landlords the right to terminate the lease upon notice of sale
***These terms can scare off potential buyers and halt transitions altogether.
3. Long-Term Renewals That Lock You In
While a long lease may seem like a smart move for a growing practice, when you’re planning to sell, it could be a trap:
- If a buyer backs out, you're stuck with years of lease obligations
- Buyers may be wary of long-term commitments they don’t agree with
- It reduces your flexibility to negotiate with new potential buyers or even relocate
Why Assignment Clauses Are Deal Makers (or Deal Breakers)
Buyers want a smooth transition — and that includes seamless lease transfer. If your lease contains ambiguous or restrictive assignment language, the sale may be delayed or worse, fall apart. Buyers want certainty, and landlords who complicate assignments create uncertainty.
That’s why assignment clauses should be reviewed early in the process, ideally before the practice hits the market.
Strategic Lease Renewal: How to Protect Your Sale
If your lease is up for renewal but you're planning to sell within the next few years, it’s important to renew strategically:
- Communicate Early with Your Landlord
- Request a Short-Term Extension or Flexible Renewal
- Instead of locking into a 5- or 10-year term, request a shorter lease or a renewal clause that includes early termination or assignment options.
- Build in Buyer-Friendly Provisions
- Ask to include terms that permit assignment without unreasonable delay or denial and limit your post-sale liability.
- Consider “Buyer Options”
- Build in provisions that allow the incoming dentist to negotiate their own renewal or assume the lease with clear release of your obligations.
Your lease can either be a powerful selling tool — or a hidden liability that jeopardizes your transition. Don’t wait until you have a buyer to discover lease roadblocks. Start the conversation now with your landlord and your transition advisor.
Need Help Reviewing Your Lease?
We specialize in helping dentists navigate practice transitions — including lease reviews, renegotiations, and landlord communications. Before you renew, reach out for a no-obligation consultation.