Our guest blogger today is Jeremy Behar, President and CEO of Cirrus Consulting
Most dental professionals aren’t aware of the potential cost-drivers and expensive risks in their office lease. A dentist could save hundreds of thousands of dollars over their tenancy by reviewing these details before signing their lease.
1. Dental Office Lease Costs and Other Fees
“Annual Base Rent” is what a tenant agrees to pay for occupying the space. Protect rental rates by negotiating a cap on the annual escalation.
Research rental rates for competing spaces in the area, and learn what the landlord asks for other comparable vacant spaces in the building/center.
2. Operating Costs
Operating costs are expenses related to the running of the building. Since occupancy costs, like property taxes or insurance, are fixed, the lease should outline these costs. Non-fixed costs (i.e. maintenance) must be closely audited so you only pay your proportionate share.
3. Know What You’re Being Charged For
Landlords may charge expenses under the term “operating costs.” There should be “right to review statements of operating costs” language in your lease.
The following operating costs are unreasonable:
- Improvements made to increase property value
- Building repairs or replacement of structural components
- Real estate broker commissions
- Professional fees not relating to your space
- Interest or principal payments on mortgages or debt costs, unless it is your debt or “Tenant Improvement Allowance” (TIA)
- Marketing association fees that are not driving traffic to the building or helping your business
Reasonable operating costs can be controlled or reduced by setting percentage formulas or capping costs at certain thresholds in the lease.
4. Common Area Maintenance (CAM) Charges
CAM charges fluctuate from year to year depending on factors such as insurance premiums and property taxes. You should have the legal right to audit CAM charges and the lease should confirm the landlord is responsible for paying the CAM charges on vacant space.
5. Administration Fees
Don’t pay high administration fees to your landlord (anything over 5% is unreasonable). “Administration fees” and “management fees” mean the same thing; they should not be charged twice.
6. Tracking Critical Office Lease Dates
Manage critical dates aggressively. If you miss your office lease expiry date, you become a month-to-month or “overholding” tenant.
When in overholding, your landlord has the right to terminate the lease and evict you with only 30 days’ notice.
7. Double the Monthly Rent
In many lease agreements, at expiration, the landlord has the right to double the monthly rent. Check the “overholding” clause in your lease.
8. The “Option to Renew” Provision
The “option to renew” provision allows tenants to extend their tenancy. The “extension deadline” is the last day you may exercise your option to extend the lease. Negotiating “options” is beneficial because they protect against rental escalations and provide you with flexibility to stay even if the landlord has other plans for the space at the end of your term.
9. The Power of Negotiation Time and Lease Language
The best way to know your lease is fair and affordable is to have it reviewed professionally by commercial real estate and dental office lease negotiation experts. To schedule a complimentary lease review, call 855-801-1125 or visit www.henryscheindental.com/businesssolutions.
About the author: Jeremy D. Behar, President & CEO, Cirrus Consulting Group
Since founding Cirrus Consulting Group in 1994, President and CEO Jeremy Behar has expanded the company from its sole focus on dental office lease negotiation services to a broad line world-class healthcare consulting organization. As a prominent leader, speaker and author, Jeremy has extensive experience in commercial real estate consulting and has taught thousands of dentists how to best leverage their office leases to maximize the value of their practices. Contact Jeremy directly with any questions about your lease at 1.800.459.3413 x 3226 or firstname.lastname@example.org.