Avoid the 'relocation clause' horror story
When negotiating a dental lease, don't set yourself up for a relocation clause horror story. Dental lease experts Norman Gelfand and Pamela Gelfand share their advice and explain best practices, such as the proper use of a liquidated damage provision.
In this monthly feature, Norman Gelfand and Pamela Gelfand share their expertise on dental leases. If you have a question or story you'd like to share, email Ms. Gelfand at firstname.lastname@example.org.
When it comes to dental leases, we've heard plenty of horror stories. Here's one we frequently hear about relocation clauses—which are notorious troublemakers. What follows is a paraphrased version of one dentist's story.
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I have a relocation clause in my lease. Now the landlord is exercising that right. The landlord is moving me to another space in the same building because he just leased a major part of the building to a large tenant. I’ll still be in the building with the same square footage, but out in left field!
The new space has to be built out for a dental office. I must notify my patients, change my paper system, and get all my internal operations up and running in the new space. My patients are unhappy, and I could lose some of them. I’ve already set up my dental office once, and it will cost me big time to do it again. I’m trapped!
My real estate broker did not push the issue during the lease negotiation process, and my attorney glossed right over it because there is nothing illegal about a relocation clause (meaning it’s valid and enforceable).
How could this scenario have been avoided?!
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How to avoid a relocation clause horror story
A relocation clause should be eliminated early on in the lease negotiation process. It should be a deal breaker from the get-go. However, if the landlord insists on keeping it in the lease, you (the tenant) should make it costly for the landlord to exercise the relocation right.
If the landlord agrees to reimburse you for some of your costs during relocation, your best bet would be a liquidated damage provision in your lease. This provision awards you a punitive amount of dollars without having to prove your expenses or loss of revenue due to business disruption.
Also, make sure to get space of like size, kind, and quality. It should have the same accessibility for patients.
Here's an additional hint: At all costs, try not to lease from a rigid landlord. It may be a sign of a contentious tenant-landlord relationship. Don’t have your mind set on a space that is not a good business decision.
Avoiding pitfalls such as a relocation clause is all the more reason to have an experienced dental real estate broker on your side to negotiate a tenant-protective dental lease.
Norman Gelfand has 30 years of experience as a commercial real estate broker. Pamela Gelfand joined the firm in 2001. Together, they’ve represented more than 600 tenants in lease negotiation. Both have exclusively represented dental tenants and buyers for 17 years. They help dentists in securing ideal locations, negotiating money-saving, market-savvy economics, and tenant-protective lease negotiation. Their firm’s unique lease negotiation begins with the identification of hidden business risks within the lease that are outside of the legal framework that are typically not addressed by most brokers and many attorneys. They negotiate tenant-protective leases by shifting these hidden business risks away from the dental tenant to safeguard the tenant’s capital investment—a key element in profitability and practice value. Learn more at dentalrealestateexperts.com. Contact Norman at (512) 833-5300 or email@example.com, and contact Pamela at (512) 468-1938 or firstname.lastname@example.org.
Also by Norman Gelfand and Pamela Gelfand
Editor's note: This article first appeared in the Apex360 e-newsletter. Apex360 is a DentistryIQ partner publication for dental practitioners and members of the dental industry. Its goal is to provide timely dental information and present it in meaningful context, empowering those in the dental space to make better business decisions.
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