Plan Ahead: Use Restrictions
You’ve found the perfect location and have progressed to negotiating the terms of your office lease or the purchase of the property where your office will be operating. While things may seem well and good, a hazard lurks, waiting to be uncovered: due to a use restriction, you can’t open a dental office in the space.
What exactly is a “use restriction?” Like it sounds, a use restriction is a legal roadblock that may prohibit or disallow certain uses of the real estate you’re interested in. They can come in different forms, such as zoning restrictions (zoning laws generally only allow certain uses for property in a zoned region, and may disallow dental offices) or contractual restrictions, in which the owner of a property has agreed to exclude others from certain uses. In fact, if you’re negotiating a lease, you’ll very likely want the owner of the space (your landlord) to agree to your own exclusivity restriction that would give you the exclusive right to operate your practice in the building or shopping center and prevent your landlord from leasing to other competing dentists.
Before you begin planning to lease or purchase a property, you’ll want to be certain that you’re allowed to open a dental office in the space you’re interested in.
When Leasing, Try to Get your Landlord’s Guarantee
Ideally, your potential landlord will agree to represent and warrant that a dental practice is a permitted use. This means that your landlord is guaranteeing that you can operate a dental office in your leased space – if any problems involving use restrictions arise, it will be your landlord’s responsibility to fix them or relieve you from further responsibility under your lease.
Also, if there are other tenants in the building or shopping center that you’re looking to lease, request that the landlord show you the actual text of the exclusivity provisions they have granted to others in the building or complex. For example, even if your landlord may honestly represent that they have not granted anyone an exclusive right to operate a general dental office, they may have granted another tenant the exclusive right to a operate a specialty dental practice, such as periodontics. Keep in mind that these types of exclusive rights will only apply to properties under your landlord’s control, and not to all neighboring properties.
It’s also helpful to do a quick Google search of the area around your future dental office to get a sense of the other types businesses you might be bumping shoulders with in the future, and can put you on guard for potential exclusive use issues you may have down the road.
Zoning: Should You Stay or Should You Go?
Before buying or leasing the property for your dental office, you’ll want to investigate the zoning for the property and discover any potential zoning issues. Ideally, the zoning for the location you’re interested in will allow you to operate a dental office specifically “by right” which means that you don’t need to initiate a process with the local government to obtain the approval to do so. Don’t take anything for granted, though, as a zoning classification that allows a “medical office” by right does not necessarily allow a dental office.
What if zoning doesn’t allow a dental practice? If you’re dead set on the location, you’ll need to request an approval or variance to overcome the zoning restriction and you will not be able to open your dental practice until you obtain it. This can be a time-consuming process so you’ll need to take this into consideration as you plan the timing of your practice transition and opening. Getting experienced legal counsel involved can help to streamline the process. Zoning issues aren’t necessarily deal killers, either – if you can anticipate the time it takes to overcome zoning obstacles, you can factor this additional time into delaying a closing of current office location or you can try to negotiate an additional free rent period with your new landlord so that you have time to work through the process before you have to start paying rent. Keep in mind, however, that not all requests for approval or variance are granted so it’s advisable to have an attorney get involved before you sign your lease or the agreement to purchase so that they can negotiate appropriate protections and, ideally, an “out” if you are unable to get the approval or variance needed for you to operate your dental office.
Early identification of use restriction issues will allow you to adjust your plans and help you avoid nasty surprises. Make sure you’re on the look out for them.