CDA Essentials 2017 • Volume 4 • Issue 6

35 Issue 6 | 2017 | S upporting Y our P ractice To Rent or toOwn, That Is the Question Timothy Brown is president and CEO of ROI Corporation, a company that specializes in the appraisal and sale of Canadian dental practices. He spoke with Oasis Discussions about how the value of a dental practice is affected by a dentist’s decision to own or lease their office space. How does renting or owning affect the value of a practice? Ownership of office real estate has its advantages. When a dentist owns their office real estate and puts their practice on the market for sale, everybody is more comfortable and confident in the sale. Plus, the practice will probably sell for a higher amount and result in lower legal costs. The seller has the option to either sell the real estate with the practice or lease the real estate to the buyer. If the seller leases the real estate to the buyer, we recommend a 10-year lease so that the buyer can get their bank financing over the same 10-year term. On the other hand, if the seller is renting their office space, the buyer can take over the seller’s lease—this is called landlord assignment or approval of transfer of the lease. But there is a fair bit of uncertainty around doing this; assignability depends on the credit worthiness of the buyer. Plus, landlords are buying properties for redevelopment or repositioning, and they don’t always maintain long-term relationships with their tenants anymore. So if you’re renting your space and you want your practice appraised, it will probably be appraised for a lower amount compared to a practice where the real estate is owned by the dentist. As a potential buyer looking to rent out the premises, what should I look for in a lease agreement? For any lease—a new one, a renewal, or an assignment of a lease if you’re taking over another dentist’s location—you have to look for clauses related to demolition, relocation, sale of building and assignment, and other bombshells that can prevent the sale of the practice. If you don’t know what’s in your lease, you don’t want to find out when you have to sell your practice. Call ROI to get that lease read—that’s what we do. Timothy Brown For any lease you have to look for clauses related to demolition, relocation, sale of building and assignment, and other bombshells that can prevent the sale of the practice. This interviewhasbeencondensed andedited. Theviewsexpressedarethoseofthe authoranddonotnecessarilyreflect theopinionsorofficialpoliciesofthe CanadianDentalAssociation. timothy@ roicorp.com