IMPORTANT CONSIDERATIONS IN OPENING A NEW DENTAL PRACTICE

Instead of buying an existing practice, many dentists choose the option of opening a new office in a chosen location. In this article, we will discuss the legal steps and documents necessary for implementing such a decision.

The first step for any dentist in opening a new practice is the creation of a legal entity. The most frequent form this legal entity takes in the health care arena is a professional corporation. This is known as “incorporation.” 

In the current business and legal climate, most dentists don’t need much convincing that they must incorporate. Some still remain skeptical, however. The strongest argument in favor of incorporation is liability. Nevertheless, I have clients who object to this also, saying:  “But I have malpractice insurance.”

My response to this is that liability may stem not only from a professional action, but from a landlord dispute, employee situation or a creditor problem as well.

Liability protection, however, is not the only reason that I recommend incorporation to my clients. There are numerous other legal, financial and business advantages in working in the corporate form. In fact, I cannot think of a single argument against this step.

The next step in opening a new practice is the negotiation of an acceptable lease for the practice. Most landlords offer “standard” leases, which frequently run 60 or more pages in length. A dentist may feel overwhelmed and outclassed when faced with such a “monster document.” My role as tenant’s counsel is to level the playing field by negotiating the key points and making the lease manageable. Here are some examples: 

1. Incentives. Landlords will often, if asked, offer incentives to prospective tenants. Generally, these incentives fall into two categories: “rent abatement” and “build-out allowance”.

• Rent abatement is a period of time when rent is not due, even though the space is already occupied. The important nuance here lies in specifically when such a period starts. Leases may refer to various significant moments in time, such as “commencement date,” “possession date,” “effective date,” etc. The role of the tenant’s attorney is to clearly identify each of those dates and negotiate the details. 
• Build-out allowance is a contribution that the landlord makes toward the tenant’s costs in the renovation of the office space, usually, expressed as an “X dollars-per-square foot” amount. Landlords, however, will often place conditions on the allowance, such as which contractors can be used, what insurance must be secured, etc. Again, the lawyer’s task is to negotiate those terms to ensure that the allowance is paid on time. 

2. Landlord responsibility. Another important aspect of lease negotiation is the landlord’s responsibilities. First lease drafts are usually very one-sided, slanted towards the landlord’s interests. In truth, there is no such thing as “standard lease” – everything is negotiable. Also, the “minimum rent” may not be the only payment due under the lease, which may refer to “additional rent,” common area maintenance (CAM) or property tax pro-ration. It is the attorney’s responsibility to explain these, and, if possible, eliminate some of them. In my practice, we often go through five or six lease drafts until a mutually acceptable final document is agreed. 

3. Municipal requirements. Finally, a dentist opening a new office should remember that many municipalities have their own restrictions such as city licenses, zoning and usage ordinances, etc. Those should be studied before the lease is signed.

Opening a new practice is an exciting opportunity. A dentist should feel that this choice is the most comfortable and be certain that the patients will be best served. My role, as the attorney is to ensure that this process is completed in a fast, reliable and reasonable manner, so that the dentist can archive these goals with confidence that his or her interests are protected and all legal dots are connected.