Navigating dental practice leases: Key legal terms dentists should understand

At Mason Thomas Law, we have the pleasure of working closely with dentists across the UK, helping to make their business goals a reality – whether they’re buying or leasing premises for their practice.

Our expertise in dental property law, combined with our strong partnership with CMP Legal, ensures a seamless, joined-up service that covers both the business and property aspects of your transaction.

A dental surgery operates under unique regulatory, operational and structural requirements. This means when it comes to leasing commercial premises for a dental practice, understanding key legal terms in an agreement is critical.

Here, Mason Thomas Law’s solicitor, Lebby Mahmood, who has experience in dental property transactions, shares some of the most important legal terms practice owners should consider when it comes to a commercial property dental lease:

1. The Lease

This is the core legal agreement between the landlord and tenant, setting out the rights, responsibilities, and obligations of both parties. It creates a legal interest in the property and is the document that gives you, the tenant, the legal right to operate your dental practice from the premises.

2. Due Diligence and Planning Permissions
   
   Before signing a lease, ensure the premises have the correct planning use (typically Class E for dental practices), and check for any local authority or building compliance issues that may impact future registration with the CQC.
   3. Term of Lease

   The term refers to the length of the lease. Dentists should carefully assess whether a short or long-term lease is more suitable for their business plans. Importantly, lenders often prefer leases of at least 15 years – so even if you aren’t seeking funding now, planning for future finance is wise.

   4. Break Clauses

   Including a Break Clause (the right to end the lease early) offers flexibility, especially for growing practices or start-ups. Be sure to understand the notice period and conditions attached.

   5. Rent, Payment Terms and Rent Reviews

   The lease will outline the rent amount, payment frequency, and how payments should be made. For leases longer than five years, a rent review clause is usually included. This allows for periodic rent adjustments, often in line with market rates or inflation indices like the Retail Price Index (RPI). However, it’s common for leases to include a ‘no downward review’ clause, meaning the rent won’t fall even if market values drop.

   6. Security of Tenure

   Under the Landlord and Tenant Act 1954, tenants have the right to renew their lease when it expires, unless the lease has been ‘contracted out’ of the Act. If possible, dentists should negotiate to retain this protection, it adds long-term security and peace of mind.

   7. Permitted Use Clause

   This clause defines how the premises can be used. It must specifically allow for use as a dental practice. Make sure it’s flexible enough to cover the full range of treatments you offer now and those you may want to introduce in future. A narrow use clause can limit your ability to grow or diversify services.

   8. Stamp Duty

   Some leases attract Stamp Duty Land Tax (SDLT) depending on the length and rent. Our expert lawyers will be able to calculate any liability to ensure you meet HMRC requirements.

   9. Insurance

   Generally, the landlord will insure the building and recharge the premium to the tenant. You’ll need to comply with any policy terms. It’s also important your lease addresses what happens if damage occurs that isn’t covered by insurance so you’re not left exposed.

   10. Common Areas

   In multi-occupancy buildings, areas like waiting rooms, corridors, or shared washrooms may be jointly used. It’s essential to understand who maintains these areas and what share of the costs you’ll be responsible for under the service charge provisions.

   11. Alterations

   Want to install a new dental chair, x-ray room or undertake a reception fit-out? Most leases require landlord consent for alterations, which usually cannot be unreasonably withheld. Be sure your lease allows for the specific changes your practice needs now and may need in future.

   12. Reinstatement Clause

   Before making any internal alterations to your leased premises, check your lease carefully. Many commercial leases include a reinstatement clause, which means you’re responsible for returning the property to its original condition when the lease ends, regardless of who paid for the alterations. Failing to plan for this could leave you facing unexpected and potentially significant costs.

   13. Decorations and Repairs

   Typically, tenants are responsible for internal repairs and decoration. If leasing an entire building, you may be liable for external repairs too. Even if the landlord handles certain repairs, costs may still be passed on through the service charge.

   14. Forfeiture

   If lease terms are breached, such as non-payment of rent, the landlord may have the right to terminate the lease and take back the premises. Knowing these triggers and your rights to remedy the breach is vital to avoid unexpected eviction.

   15. Assignment and Subletting

   At some point, you may want to sell your practice or bring in associates. Your lease should allow assignment (transferring the lease to another party) and sharing occupation, particularly with self-employed associates or hygienists. Planning for this from the outset can prevent future complications.

   Seamless Legal Solutions for Dentists

   At Mason Thomas Law, we work with dentists to provide a fully joined-up legal service, handling both the property and business elements of your transaction, working hand-in-hand with CMP Legal. From lease negotiations to purchase agreements, we’ve helped dentists like Dr Aqsa Burki and Ajitroy Singh Mom navigate commercial leases on their new dental practices.

   Whether you’re starting out, expanding, or restructuring, our expert Dental Property Team lawyers can ensure your lease works for you now and long into the future.

   To speak to a member of our specialist team, contact us on 0114 2945 360, or learn more here.