Dental Lease Pitfalls

The details in your dental office lease can cost you $100,000’s in traps and pitfalls, easily making it one of the most significant documents you will ever sign. Landlords use the lease as a tool to make as much money as they can from a dentist, making it particularly critical that the terms and clauses within it are setup to help protect you, rather than hinder you.

Top 3 Traps in a Dental Office Lease:

 1) Relocation Clause: Does your lease give your landlord the right to relocate you? Landlords are fully aware that a dental office is an expensive, difficult–to-relocate businesses that can take months to re-build.  Two things can put you out of business in the event you are relocated:

i) You are forced to absorb the cost of re-building your practice, that can be upwards of $500,000.

ii) During the move, you may be faced with 3-12 months of practice “darktime” before the move is complete, meaning there is no incoming revenue, and business is at a stand-still.

 2) Death & Disability Clause: Is there a death and disability clause in place that protects you in the event that something unexpected happens, and you’re unable to work? Is the lease setup so that your family is not left paying debts or monthly rent?

 3) Assignment Clause: Do you plan to sell your office sometime in the next 10-20 years? Are you sure  your lease permits you to sell your practice at all? Unfortunately, many do not. It’s critical for dentists, more so than any other type of tenant, to ensure that the lease agreement is setup properly to allow for the sale of the practice and lease transfer. If not, the landlord can either prevent the sale from happening, or collect proceeds from the sale in exchange for granting permission to sell.

The above sections of a lease agreement, along with many others are not taught to dentists at any point in their careers, yet the success of the practice and the eventual exit from dentistry hinge on them.

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DenTech 2013 – DentalAssets Review

DenTech 2013 – Shanghai, China

A few years ago, I attended my first dental trade show; CDA Presents Anaheim. It was a learning experience and I remember thinking “Wow! What a big show.” By the end of the show my feet hurt, my ipad had 3% battery remaining, I ran out of business cards, but came out of the show with new contacts and met many dentists. After a few months I had the privilege of attending IDS 2013 in Cologne. During IDS, I was amazed at how many countries were represented and the number of international dental attendees. It was at IDS, I had the pleasure of meeting Grant Chen who invited me to DenTech. As a first time attendee to DenTech I had no idea what to expect, but will say I thoroughly enjoyed the exhibition.DSC_3189

This year, DenTech had more than 69,100 professionals visit (10% Increase from last year) and 34,500 square meters of exhibition space with 1,600 booths. The venue is massive. The upper floor was dedicated to Chinese Manufacturers while the bottom was a mix of the Germany Pavilion, USA Pavilion, Korean Pavilion, Taiwan Pavilion, and more. The 17th China International Exhibition & Symposium on Dental Equipment, Technology & Products catered to dental labs, dental supply companies, and dental owners looking for high-quality and costs efficient products and equipment produced in China and throughout Asia. In addition, DenTech provided many opportunities for dentists and industry professionals to view the latest dental technologies and techniques.DSC_2744

Dentech 2013 was the 1st International forum on dental CAD/CAM and the 8th Asian Dental Lab Outsourcing Exhibition. On each floor you will find domestic and International manufacturers for Digital Scanners to electronically input your patients mold. DenTech hosted a myriad of CNC manufacturers such as DMG, Willemin-Macodel, SmartTools, Wieland Dental, and software solutions such as Exocad, Delcam and others. As usual, the CNC companies showcased the ease of use and the speed and accuracy of their cutting heads. As the 8th Asian Dental Lab Outsourcing Exhibition, there were numerous opportunities for you to compare acrylic resin teeth, bridges, polishing wheels, and additional lab equipment. If you are interested in learning more about outsourcing your lab work, sign up at the bottom to be notified of DentalAssets’s new website launch. We will provide you in depth information for all your outsourcing needs.

In the weeks leading up to DenTech, I received email notifications announcing events during the show (VIP Buyer meetings, Invitation to China, etc). I appreciated these messages as it allowed me to schedule time for meetings throughout the show and reminded me to check my passport , visa and hotel accommodations. DenTech assisted with a letter of invitation which made the visa process hassle-free.DSC_2738

A standout feature of DenTech 2013 was the VIP Buyer Meetings where buyers spoke directly to manufacturers looking to expand territories. These no pressure meetings were held in DenTech’s VIP Lounge which offered snacks, refreshments, and a place for you to relax. If you’re a supplier or distributor, I would recommend attend this show solely for these meetings. I was able to meet 10-20 manufacturers to discuss their products and possibilities for cooperation.180B7173

Aside from the VIP Buyer meetings, the halls were packed. As previously mentioned, the 2nd floor of the show was reserved for the Chinese manufacturers. On the first floor you would view products from the Germany Pavilion, US Pavilion, Korean Pavilion, and others. Within each hall, you will find rows of companies for hand pieces, lab equipment, CAD/CAM solutions, orthodontics, disposables, digital imaging equipment and other dental products. If there is any type of equipment your office needs, I am certain you are able to find it here.

I am excited to attend next year and hope to see you there. Thank you Grant, Carrie, and the UBM Showstar team for hosting such a great show! To anyone considering attending a show in Asia, I would highly recommend attending DenTech. Most companies have representatives able to speak English, but It would be best to bring a translator (DenTech also provides a service to pair you with a translator) or have an associate fluent in Chinese (Mandarin or Cantonese).

Shanghai itself is a beautiful city and if I had more time, I would have enjoyed traveling around the city. There are plenty of hotels in the region and even for attendees unable to speak Chinese, you can get around easily.

If you are interested in learning more about the manufacturers DentalAssets.com spoke with, please check back to our website in the next 2-3 weeks. We will be launching our updated platform with newly listed inventory and provide dentists with many great services!

 

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Negotiate the Best Dental Office Lease

Barry H. Josselson, A Professional Law Corporation, and
A. Lee Maddox DDS, A Professional Law Corporation

Abstract: The dentist’ office lease is one of the most critical legal agreement the dentist will sign in his or her professional career. Understanding the numerous economic and non-economic points of lease is integral to the success of one’s practice. This article discuses 10 key points that will ensure a fair and equitable lease agreement.

Unlike associateship relationships, which can be terminated, or partnerships/corporations with other dentists, which can be dissolved, the dentist’s office lease cannot be ended unilaterally by the tenant or breached without impunity without the dentist’s incurring substantial legal risk, liability, and economic fallout. Accordingly, the dentist’s understanding the numerous economic and non-economic poitns during the course of negotiations with the landlord and the dentist’s real estate attorney’s perusal of the dental lease are integral factors to the success of the dentist’s practice. Considering the following 10 key points will ensure a fair and equitable lease agreement and business relationship with the landlord for years to come.

NEGOTIABILITY
The proposed lease submitted to the dentist is simply the landlord’s first offer of the terms of the contemplated relationship. Many dentists bleieve that beacuase the leaes offered to them is in writing or ina  pre-printed form, it is not subject to modifcation or revision. Some dentists are wrongfully informed by their lieasing agents that their proposed leaes has been signed by all of the other tenants without revision (the incoorrect implication being that the lease must be fair; otherwise, tenants would not have signed it). Northing is further from the truth. All office leases are drafted in favor of the landlord; the only issue is whether the lease has been drafted slightly on-sided, moderately one-sided, or extremely one-sided in favor of the landlord. Lease provisions favoring the landlorder, however, will neither be prominently noted nor highlighted in the document. Instead, the dentist’s lease will be prepared by the landlord’s attorney or landlord’s real estate association to favor either their client or their constituents, respectively, and not to accentuate those lease provisions that have been intentionally drafted in favor of the landlord rather than the dentist tenant. Any agreement can be negotiated. An analysis of the lease and negotiation of the terms with landlord need not be acrimonious or hostile events, but simply the first steps in communication to the landlord the dentist’s desire to have the landlord-tenant relationship be fair and equitable. Recommendation: The dentist should always consult with a real estate attorney specializing in dental office lease before signing any long-term leases.

Options to Renew the Leases:

An option to renew is a wonderful tool to provide the dentist with flexibility. At the end of the lease term, the tenant has the “option” to remain in the premise by notifying the landlord of the dentist’s intent to stay. Or, to the contrary, if the dentist determines that it makes more sense to relocate to new premises, he or she reserves the right to leave without having previously entered into a longer-term lease. Options to renew, therefore give one the security of a possibly long-term lease without having to make a commitment to a long-term lease. most options to renew are for periods from three to five years. The value of one’s option to renew, however, can be severely limited by the landlord in the following ways:

1) Many leases allow only the original tenant to exercise the option to renew, not any buyer of the dental practice. This limitation will not be conspicuously disclosed in the document, Instead, most leases innocuously state the option to renew is “personal” or “unique” to the original “tenant” of the lease. If the proposed purchaser of one’s dental practice is not able exercise the previously negotiated option to renew, this could adversely affect the value of the practice, especially if there are only a few years left on the dentist’s current lease. The risk that the current landlord might not renew the lease to the prospective buyer on that the lease may be renewed albeit at a substantially higher rental rate is significant and should be avoided.

2) The determination of fair market rent can also be fraught with risk. A careful perusal of the rental rate forumula found in many options to renew reveals what appears to be an equitable definition of the fair market rental of the premises based upon current rents behing charged for comparable space in similarly situated properties. however, the dentist must examine more closely many of these formulas. Some will state that the rental rate shall be the greater of fair market rental or the last year’s rental rate. The result: In an escalating rental real estate market, fair market value shall provide the land lord with great upside potential. In a falling renmtal real estate market, if true fair market rents are below the last year’s rental rate paid by the dentist, the lease mandates that the rental rate paid by the dentist during the option period shall still be the last year’s rental rate (even though such rental rates could be far in excess of the lower fair market rental rate).

Assignment or Subletting of the Lease:

The assignment or subletting of the dental lease to a prospective purchaser is critical to the later sale of the dentist’s practice. Very few practices are sold to buyers who intend to move the practice to another location. Moving can cause substantial patient attrition as well as substantial costs in building out, a new office. Therefore, the dentist’s ability to assign or sublet her or her lease freely and without unreasonable restraint to the buyer is crucial. The landlord can limit the dentist’s ability to assign or sublet the lease in the following ways:

1) If the lease states that the landlord’s consent “may be arbitrarily with held,” withheld at the landlord’s sole discretion,” or other words. similar in effect, the landlord can unilaterally withhold consent at the time that the dentist requests the lease to be transferred to his or her buyer. No buyer of a dental practice will consummate a sale without locking a long-term lease securing the investment the buyer has just made. Moreover, sophisticated dental lenders will not lend money to purchase without the lease term (with an option to renew) being equal in length to the term of the practice purchase loan. instead, the lease should state that the landlord’s consent”shall not be unreasonably withheld”.

2) An increasing number of dental office leases provide that 100 percent of the rental income (received by the dental subletting the premises) in excess of the rent obligation due under the lease (by the subletting dentist) must be paid to the landlord. the dentist should try to delete such obligations or negotiate a lesser percentage than 100 percent. most importantly, the description of the “consideration” to be paid to the landlord should be limited to only sublease rental income and not any consideration for goodwill, covenant not to compete, or leasehold improvements received by the dentist when selling his or her practice. Otherwise, the landlord may legitimately claim a right to part or all of the practice sales proceeds received by the seller from the buyer of he dental practice.

3)  The “recapture clause” gives a landlord the right to “take back” the premises even if the dentist has followed the protocol of first seeking the landlord’s approval of the proposed buyer of the practice prior to the transferring the lease. Such a recapture clause innocuously states that the landlord can consent to the assignment or, in the alternative, assign the lease to itself in lieu of the proposed buyer. Such recapture clause is placed in leases and is exercised by landlords in escalating real estate markets or in those situations in which the landlord is not able to withhold its consent to the proposed buyer. Such a “recapture clause” must be stricken from the lease document.

4) Rent increase and repayment of tenant improvements allowances can be costly hidden surprises. When a dentist assigns his or her lease to a new buyer, the buyer has purchased the dental practice in contemplation of paying rent under the lease according to the selling dentist’s rent schedule negotiated at the time when the selling dentist initially signed such document. more and more leases have language in the documents stating that “as a condition for the landlord’s consent to any assignment,” the landlord may raise the rent or be repaid by the selling dentist all the money which the landlord spent for the leasehold improvements in building out the seller’s dental office Such provisions are unacceptable and should be removed from the agreement.

5) All leases provide that the selling dentist’s assignment of the lease to another dentist will not release the seller from any liability if such buyer later defaults under the lease. The language that provides that the selling dentist shall remain liable should be deleted, especially since the landlord will have previously approved the buyer as a bona fide and qualified party to assume the seller’s lease.

We will be posting additional items to cover while negotiating your dental office’s lease. For more information, please contact Barry Josselson at (800) 300-3525

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Dental Diaries: Food for thought

Original Article by Sheri B. Doniger, DDS.

I met a potential new patient today in Michael’s of all places. After I finished deciding on the appropriate frame and matte for the street art I recently purchased, I did what I usually do. I mentioned to the clerk that I was a dentist and, since she helped me, would I be able to help her? Was she looking for a new dental home?

Interestingly enough, the majority of the people you say this to are surprised at the personal one-to-one approach. Some say they are happy with their dentist, who happens to be their aunt/uncle/in-law/cousin’s relative or some other familial connection. Another happy few are interested and will take a business card. Others just cover their mouth and say, “I am so petrified of the dentist, I can’t go.”

The woman at Michael’s had a very interesting response. She was overjoyed that I had approached her. She was in the market for a new dentist. She and her family hadn’t been in a while, had some dental benefits to defray the expense, and were happy not to have to compile and consider a random list of dentists from which to choose.

She also mentioned something interesting: Her husband was a true dental phobe. He was afraid of the dentist because their existing dentist was not only a “rough rider,” as she described it, but he smelled of cigarette smoke. Her husband considered the smell repulsive and said it made him more uncomfortable in the dental chair.

I am not a smoker, and I don’t understand why some dentists smoke. We are the caretakers of the oral condition, and smoking does not improve anything in your mouth (or your body, for that matter). There is a dentist in my building who is outside every hour of every working day, no matter the weather, smoking up a storm. Sometimes his patients join him. When he goes into the elevator, he brings his smoking scent with him. The elevator reeks. My team has mentioned it, and I have experienced it firsthand. How does he manage to treat patients and not be offensive?

Many years ago, when I was working as a temporary hygienist, I was placed in an office with two operatories and a lab in between. The dentist saw a patient in one room, went into the lab and puffed on a cigarette, then came into the hygiene room to do an exam. He then returned to the lab, took a smoke, and finished up in his operatory. Needless to say, I didn’t last long at that facility. I couldn’t breathe!

We sometimes don’t think about our daily invasion of our patients’ personal space. The garlic-laden pasta we had last night or the Thai food we consumed at lunch are forgotten. Yes, we all have mouthwash in our offices, but is it enough? Even behind the mask and mouthwash, we may be giving our patients an excuse not to return.

I am not saying every dental office should go out and purchase aromatherapy or light candles in the office. I just wanted to share some food for thought. No reason to give our patients another reason not to visit us. Because remember: They have long memories.

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Patent Bits: Patents on new device or technique: How does one get a patent?

Quan Nguyen, Principle at Nguyen and Tarbet

First, you may want to do a “prior art” search to see if the same or similar invention is already out there. Generally, you can hire a patent professional to conduct the search for you, but you can do the search yourself to save money. One of the best free patent database is GOOGLE PATENT. There are several requirements that your invention has to meet prior to the USPTO granting you a patent. The two major ones are (1) your invention is novel, and (2) your invention is non-obvious. “Novel” means that there is nothing out there identical to it. “Non-obvious” means that it would not be obvious for someone to combine two or three existing items together to arrive at your invention.

Are you considering filing a patent? Do you need some advice with your invention? Register with DentalAssets.com for your complimentary consultation call with Quan Nguyen!

Nguyen and Tarbet CALIFORNIA OFFICE
4199 Campus Drive, Ste. 550
Irvine, CA 92612
Tel: 949.743.4912
Fax: 800.861.3071

Nguyen and Tarbet ARIZONA OFFICE
6039 East Grant Road
Tucson, AZ 85712
Tel: 520.731.1364
Fax: 800.861.307

 

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Patent Bits: How the new First-To-File rule can affect start-ups?

Quan Nguyen, Principle at Nguyen and Tarbet

The new first to file rule significantly affects start-ups in that it is even more important to file patent applications than before, and filing patent applications requires a patent budget that is challenging for most start-ups to obtain. Under the old rule of first-to-invent, the start-up is not under as much pressure to file a patent application because the old rule says that even if the start-up files second the start-up may still win if the start-up thought of the invention first. So under the old rule, the start-up can delay on filing a patent application a bit and save money. However, under the new rule, the start-up has to file first to win. Although the new law has put some economic pressure on the start-up, it also has a provision to relieve this pressure a little bit. Under the new law, there is a Micro Entity Status provision where if the filing entity makes less than about $150,000 per year (along with other requirements), then the filing fee would be reduced by about 50% – which makes filing patent applications somewhat more affordable for most start-ups. Also, with the new first-to-file rule, start-ups should file more provisional patent applications, as opposed to the non-provisional application, because it is generally less expensive to file provisional applications and it helps secure an early filing date. For the most part, the start-up can file its own provisional application. Generally all that’s required for filing a provisional application is a detailed written description of the invention and of some possible variations, and a set of drawings showing same. In the near future, I will send out a blog on how to draft a winning patent description.

Interested in learning more with the First-To-File rule? Contact Quan Nguyen at their offices:
CALIFORNIA OFFICE
4199 Campus Drive, Ste. 550
Irvine, CA 92612
Tel: 949.743.4912
Fax: 800.861.3071

ARIZONA OFFICE
6039 East Grant Road
Tucson, AZ 85712
Tel: 520.731.1364
Fax: 800.861.307

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Low Cost Retirement Plans for Small Business Owners

by Konstantin Litovsky, Principal at Litovsky Asset Management

So you are now ready to open a retirement plan for your business. Whether you are looking to minimize taxes or provide a valuable perk to your employees, there are many different choices available depending on what you are trying to accomplish. Which plan should you open? SEP IRA?  SIMPLE IRA? Individual 401k? Safe Harbor 401k? Cash Balance or a Defined Benefit plan? This article provides general guidelines on how to select an appropriate plan for your business.  Whether a particular plan is a good fit for your business should ultimately be determined by your CPA or your fee-only retirement plan consultant.

When selecting a plan for your business you need to consider both your personal financial situation and your current and future business needs.  For a business with only a spouse employee, your personal financial situation will determine which plan will best address your needs.  A mature business with many employees might need a plan that is customized to the needs of the business owners, especially when the owners want to maximize their own contributions. A plan opened for a solo proprietor is not going to be appropriate for a business with employees, so it is important to understand how to transition your retirement plan as your business needs change.

Learn about these options; Owner with spouse employeeSmall businesses with non-spouse employees, Midsize company, companies with high earning owners/key employees, Planning tips for small business owners, How to go about opening a plan, and  How to run a successful plan at Konstantin’s blog HERE.

 

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Patent Bits: Do you need a prototype to apply for a patent?

Quan Nguyen, Principle at Nguyen & Tarbet

Not at all! You just need to “enable” and adequately describe your invention in words and drawings. In patent language, to “enable” means that you describe your invention in a way that others can read your patent application and go to reproduce your invention. Having said that, it is always helpful to try to make a prototype for your invention. When you make a prototype, you get to test the invention to see how it works. Often time you will find ways to improve your invention. And when you identify those improvements, you can describe those improvements in your patent application to make it a stronger application.

Do you need patent advice? Visit Nguyen & Tarbet and contact Quan Nguyen. Don’t forget to register with DentalAssets.com to claim your free consultation call with Quan Nguyen!

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Patent Bits: To file or not to file a patent application on your new dental innovation?

Quan Nguyen, Principle at Nguyen and Tarbet, LLC

It’s all about market share and creating barrier to entry. Let’s remember that one of the biggest reasons for having a patent is to be able to stop others from making/selling products that compete with yours.

Here are a couple of scenarios where it would not be worthwhile to file a patent application: (1) There are hundreds of effective ways for a competitor to design around your invention. If this is the case, then it doesn’t matter what or how many patents you get, the competitor will be able to make/sell a product that does not infringe on your patent.

(2) The technology of the invention will become obsolete in a few years. In this case, it would be better to be the first to market and make as much money as you can and move on. However, there are situations when it would be advantageous to file a patent application. For example, the invention is a “choke hold” technology and everyone must use the invention to achieve a critical task. Or even if the invention is not a complete “choke hold”, but the invention design that you have is the least expensive to manufacture, then filing a patent application on such an invention may be worthwhile because you have the advantage of competitive pricing.

Although patents may provide a great barrier to entry, there are other non-patent barriers to consider as well: FDA approval, competitive pricing, and brand dominance. If you have an invention you would like have patented or have a question regarding this process, please contact Nguyen & Tarbet, Intellectual Property & Law.

CALIFORNIA OFFICE
4199 Campus Drive, Ste. 550
Irvine, CA 92612
Tel: 949.743.4912
Fax: 800.861.3071

ARIZONA OFFICE
6039 East Grant Road
Tucson, AZ 85712
Tel: 520.731.1364
Fax: 800.861.3071

 

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THE VALUE OF HAVING A DAILY PRODUCTION MEETING TO IMPROVE SERVICE TO YOUR CLIENTS AND PATIENTS

Jono Lo Bue discusses the importance of having a daily production meeting to improve service and team unity.

Coordination is one of the most vital functions of running a successful practice and can often be a turning point for a practice in improving service and working as a team to deliver exceptional service to patients.
I recommend starting each day with a fast, 5 to 10 minute, production meeting to provide an opportunity for staff to get in communication and get coordinated. This is not necessarily a sit down meeting, but a rapid coordination meeting to get the day started. (If you have staggered schedule shifts, you could work this into a meeting at the start of each shift.)

With this strategy all staff, including associates, play an active role in this meeting by being:

1. on time
2. prepared with relevant charts and information
3. focused on what needs to be accomplished for the day
How can you promote these goals? Read more at Business Straight Talk
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