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How Much Time Until Your Lease Expires?

March 30, 2011
Do you know when your office lease expires? If you don't, you better find out, and here's why!

When is the last time you looked at your office lease? Do you know when your lease expires? Have you ever considered what happens if you miss renewal deadline?
This article will help you:

  • Ensure that you do everything possible to avoid getting too close to, or even going past your lease expiration date without formally renegotiating a new Lease Term with your landlord, and
  • Understand what happens (in accordance with most lease agreements) if you do miss your expiration date.

Why you should never missyour renewal deadline
If you do allow yourself to move past your expiration date (by mistake!), then you are a “month-to-month” tenant, also known as an “overholding” tenant. This means that you have lost one of the most important protections that a lease agreement should afford to any dental practice — long-term security to the space in which your practice is located.

Because of the huge investment you have made in the physical premises, you always need to ensure you have plenty of “term” and multiple “options to extend” your tenancy. Not only is this critical to avoiding or preventing a surprise relocation of your practice halfway through your career, it is also one of the critical ingredients in adding value to your practice at the time of a sale and transition of the practice to another dentist.

Month to month tenancy
As soon as you move past your expiration date, you become a month-to-month tenant. This means that, technically, both you and your landlord each have the right to terminate the lease with the other party by giving only thirty (30) days advanced written notice!

Can you imagine getting a letter in the mail today from your landlord terminating your lease 35 days from now because he or she decided to rent the space to an accounting office, and they are moving into your office in just over a month?

We get dozens of calls like this every year from dentists who missed their lease renewal dates and have had their tenancy terminated because another tenant came along and offered the landlord a little more rent per square foot.

Double your monthly rent?
Letting your lease expire without renegotiation or renewal may lead to a significantly negative financial hit to your business. Many lease agreements (perhaps yours?) state that as soon as you go past your expiration date, the landlord has the right to charge you twice the normal monthly rent for each month past the expiration date.

This means that if your rent is $4,500 per month, then your landlord will legally be able to charge you $9,000 per month for as long as you remain a month-to-month tenant.

Save yourself needless worry!
Our strong recommendation is that you

  • Review your lease today and identify your expirationdate, and
  • Doublecheck your “overholding” clause and find out what your penalty rents would be.

Knowing when to start the negotiation process is half the battle.

Your landlord likely knows very little about the business of dentistry. What he or she does know is that as you get closer to the end of the term, there is less time for you to renegotiate properly, and the less time you have, the less leverage you have to negotiate a deal that works best for you and your business.

You should have a lease negotiation plan and strategy in place that will lead to the best possible outcome. Waiting until a month before your lease expires will not deliver your optimal results … you have lost your leverage. Creating your plan when you have more than 24 months remaining on your lease ensures your plan is based on meeting your objectives and is not driven by desperation.

If you have 24 months (or fewer) remaining on your lease, it is critical that you begin to prepare your strategy, plan your negotiation, and leverage the remaining time that you have to structure your lease properly.

For more information about the benefits of lease structure and negotiation planning, please call Cirrus Consulting Group at (800) 459-3413, email [email protected], or visit the website at Cirrus