Page 50 - The Dental Entrepreneur

The Dental Entrepreneur

One important point to attempt to negotiate is the landlord either sharing in the leasehold
improvements cost or the landlord amortizing the tenants costs of improvements over the
length of the lease. Not only does this alleviate the need to invest substantial dollars up front, it
can allow the entire cost of leasehold improvements to be written off as rent rather than
depreciating over a long period of time. Also by not borrowing for your leaseholds, you free up
some of your credit line.

Additional Responsibilities Of The Lease

Most property leases are so called “triple net” leases. This means that the tenant, in addition to
the rental price, is responsible for the maintenance dues, utilities, and taxes.

Maintenance Dues

Maintenance dues and utility fees are for the common (shared) areas of the building, parking
lot, and also lawn, landscape and snow removal.

Utilities

The tenant is usually responsible for all the utility charges pertaining to his individual unit. This
could include water, sewer, gas, and electricity consumed on the leased premises.

Taxes

The lessee could also be responsible for their share of the property tax assessment of the
property. If the project that you are looking at is new construction, property tax assessments
usually don’t kick in for the first year, so don’t be surprised if there is an increase at a later
date.

Rental Rate Adjustment

In most instances, the minimum rental amount set out in the original lease will be adjusted
during the term of the leases. This is done one of two ways. For instance, a landlord may write
a ten year lease with a set rate quoted for the first four years with additional predetermined
adjustments every two years for the balance of the lease. The longer the term of the lease, the
more favorable the rate you are generally able to negotiate. Many leases are adjusted annually
according to the government consumer price index (CPI). The CPI is a measurement of
inflation that is monitored monthly and published with an annual figure shortly after the first of
each year. It basically gears your rental increases to that of the inflation in the economy.
Inflation has been very tame for some time now so any sudden inflationary pressure in the
economy might be met with an unexpected surprise in your rental rates.

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