A dental practice is tied to more than its patient base and equipment. Patients know the location, staff work there, and specialized improvements may be expensive to move. A promising purchase can become difficult if the buyer cannot occupy the premises on workable terms. Read the lease before treating the closing date as settled.
Obtain the entire lease package
Ask for the signed lease, amendments, renewal notices, assignments, side letters, guarantees, and any notices of default. Confirm the legal tenant and landlord and compare them with the proposed buyer and seller. The current operator may be a corporation while the dentist personally guarantees its obligations. A share sale, asset sale, or internal reorganization may trigger different provisions.
Check the remaining term and whether renewal options have been properly exercised. An option is valuable only if its notice and other requirements can actually be met. A short remaining term may affect financing and the buyer's willingness to pay for location-dependent goodwill.
Understand the total cost of staying
Base rent is only part of occupancy cost. Review additional rent, operating costs, taxes, utilities, insurance, annual increases, and any reconciliation rights. Examine who pays for repairs, dental equipment connections, accessibility changes, restoration, and replacing major building systems. The current seller's monthly payment may not predict the buyer's cost after a renewal or new lease.
Look closely at the permitted use. The language should fit the services the purchaser expects to provide. Signage, parking, hours, exclusivity, and rights to alter the space can matter to a clinic's day-to-day operation. Confirm what improvements and equipment belong to the tenant and what must be removed at the end of the term.
Map the transfer and consent process
The lease may regulate assignment, subletting, a change of control, or a new tenant. It may require information about the purchaser, payment of the landlord's costs, new security, or a replacement guarantee. Read the exact clause and ask when consent must be requested and who will prepare the documents. Do not assume that a share purchase avoids the issue or that an asset purchase automatically permits occupation.
Ontario's Commercial Tenancies Act contains provisions concerning assignment consent, but the agreement and specific circumstances still require legal review. Build enough time into the purchase conditions for the landlord's process. Document whether the buyer may terminate or extend if acceptable lease terms cannot be secured.
Protect the closing sequence
A buyer should know whether it will receive an assignment, a new lease, or some other lawful occupancy right and whether that arrangement starts when the practice changes hands. Coordinate the purchase agreement, lender requirements, landlord documents, and insurance. If the seller's guarantee is to be released, get the release in writing; a sale of the business does not itself tell you whether the landlord has released a guarantor.
For a seller, begin this review before marketing. A missing amendment or an unexercised renewal option can delay a strong offer. For a buyer, treat an uncertain lease as a transaction issue requiring a clear condition, not a problem to solve after closing.
Lease review checklist
- Remaining term, renewal deadlines, and rent during each option period.
- All occupancy costs, increases, deposits, and personal guarantees.
- Permitted use, signage, parking, repair, and restoration obligations.
- Assignment and change-of-control clauses, landlord consent, and transfer costs.
- Proposed occupancy documents, lender needs, and closing timing.
The lease should support the practice you intend to operate. Raise the issue at the letter of intent stage, when there is still room to negotiate a sensible path to closing. Contact Dentist Legal to review a proposed transaction and its premises terms.
This article is general information, not legal advice for a particular situation. Contact us to discuss your matter.
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