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Hey everybody. Thank you for joining me here today. I’d like to take a minute to thank ChiroSecure for sponsoring and hosting these events. Great company, great people. Check them out online, call them up. They’ll be able to take care of all of your insurance needs. I am Dr. Randi Ross. I’m the CEO of Premier Practice Consultants, and today I wanna bring some information to you.
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That is something that is often a surprise to people when they get to the point of actually selling their clinic, and I never want you to be surprised. I always want you to be prepared. The expression preparation meets opportunities. That is always true in any time that you’re engaging in the process of beginning to sell your practice or if you’ve actually found a buyer or we found you a buyer, or whatever it might be.
Today we’re gonna talk about your lease. And obviously if you own the real estate that your practice is in, this might not be such a great informational tip for you, but for most people, they don’t own the real estate that their practice happens to be housed in. And what we find is people often will.
Sign and execute leases to get into a space. And even though maybe they’ve read it and maybe even you’ve had your attorney review it to make sure there isn’t anything catastrophic going on in there, when it comes time to actually sell your business. And the buyer’s attorney our company.
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And when we’re looking at your lease, certain things seem to pop up that people are actually a little surprised that was in there. Or they really didn’t think it would be important or have any kind of, negative potential effect down the road. So there’s a few things that are really becoming very prominent in many leases.
More so I’ll say within. A larger kind of corporate structure or, even a space that has more by managed by a management group. So it’s a little larger. You’re not having direct access to the owner of that property usually. So there are a few things on there that are really important to note and understand it.
And actually this conversation may not change how you have to actually execute Elise, but just to really have it in the forefront of your mind of what it could mean potentially. So there are a few things we’re gonna talk about here. One is what they refer to as a personal guarantee. So that means the landlord or owner of that particular property.
Is saying you can’t guarantee this based on whatever your corporate structure is. That is actually, on the lease, a, b, c chiropractic corporation. So what they’re basically doing is they’re positioning you so that in the event that corporation or that corporation goes outta business.
They have you personally on the hook. Many of them even go as far as if you are married and you have a significant other, they will require that significant other to also personally guarantee. Their whole goal in all this is if somebody defaults on a lease payment, they want a whole bunch of people to go after.
They don’t ever wanna. Be left holding the bag, so to speak. The reason why this is so important to really understand is because as you engage in the process of selling your clinic, in today’s environment, your buyer might be more of an investor. They might be someone that’s more within a corporate structure where there is no one to personally guarantee.
There just isn’t, and you have to understand that. A good question to ask a landlord is if at some point my business was sold to an investor group, but they, but their corporation had very strong financials, would they qualify And that would that negate the requirement for a personal guarantee? Now, I can tell you, most of them upfront will just say, no, this is standard.
This is how we operate this and that. But we are seeing a little bit more and more if the corporation that’s buying the investor group has really strong and a history of financials, they have a tendency to bend a little bit. Sometimes they want them more as a, as a tenant than, an independent person, owner operator, solo.
So again, just important to understand, you are now obligated for whatever the term of that lease is. If it’s a 10 year lease, guess what? For 10 years you are locked into that personally, not just professionally. And the other thing that has come up that I don’t think people really read, or maybe they don’t understand or they think, oh no big deal, they’ll just let me out.
When it comes to it is, so if we have someone that has that signed two years ago, signed a 10 year lease, and we have a buyer for that particular clinic. So even though the landlord might approve the buyer as a new tenant, guess what? You are still on the hook as a backup guarantor for the remainder of the lease that you signed.
So what that essentially means is if three years from now the person you sold your, or the company you sold your practice to defaults on their lease, they can come after you for the remainder of that lease. It’s so critical that you understand that it may or may not actually make you sign little bit shorter leases.
If you are thinking sometime in the next three to five years, you’re gonna look to possibly sell your clinic, you might just wanna have options in there so that if you do stay one, you’re not kicked out. Also those options if the lease is transferred. Can be acted upon by the new buyer, but you’re also not locked into something super long term.
We like to think that it would never happen that for some reason a potential buyer or a buyer at that point would default on a lease at some point in the process. But, excuse me, it can happen. And you have to understand you are on the hook for that. So you do the math. If you’re paying $5,000 a month rent.
And all of a sudden you’re responsible for five years of what someone didn’t pay. That’s a big deal. And if your significant other is on there, those companies, they’ll ruin your credit and everything else. They will do their best to get to the monies that are owed to them.
So again, it doesn’t mean don’t sign a lease. Don’t come back to me and say. Dr. Ross said, don’t sign a lease that has this, because there are a lot of spaces that you don’t have any control over that, for here in the southeast, Publix, shopping centers are very popular and have lots of spaces with chiropractors within their structures.
And I will tell you that Publix, there is no bending. There is nothing. Again, I’m not telling you don’t rent in those spaces. What I’m saying is just be informed. Know what you’re signing, know what the potential consequences could be in the event that you turned around to sell your clinic. Just so you’re not surprised when the time comes and you think they’ll just give the new tenant, the person buying the clinic a new lease and then I’m out of, it doesn’t even matter if they give them a new lease.
You’re still a backup guarantor. So again, all these are things I just don’t ever like people to not really understand what they’re getting into because when it comes time that it impacts you, it might not change things, but at least you have a clear understanding and sometimes that might depend on who you want to sell your clinic to.
Okay. So that’s an important element in all this. I am Dr. Randi Ross, CEO of Premier Practice Consultants. You can find me anywhere on every social virtual platform. If you have a question about this topic or any others we’ve spoken about, just reach out, give me a call. I’ll either answer the phone or I’ll call you right back.
I wanna thank ChiroSecure for sponsoring these events, having me as a guest, and allowing me to provide you with some information.
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