Subletting space in your dental practice

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subletting space in your dental practice
Photo: jokki – 123RF

Subletting space is a common practice in many other professional sectors but can be an issue fraught with danger for oral health professionals. By Tracey Porter

The economic uncertainty that has followed the COVID-19 pandemic has forced many dental practitioners to reimagine their business finances.

For some, it may be making wholesale changes such as chasing their dream to ditch general dentistry for its more lucrative cosmetic cousin; for others it may involve simply introducing an upfront payment to prevent client no-shows.

For a select few however, it has involved serious consideration of how they could sublet their spare space to boost their clinic’s coffers.

Dental business coach Dr Jesse Green, of Savvy Dentist, says subletting is already a common practice among many sectors including gymnasiums, hairdressing salons and allied health professionals.

Yet while it is relatively rare among dental practitioners—many are already operating in tight spaces—it typically occurs when the practice has access to more space than can be reasonably used.

This approach makes the most sense if it is likely the additional space will remain vacant for an extended period of time, he says.

“I think this is not as commonplace in dental practices as it is in other industries, but subletting is viable really only around under-utilised space. The clinic may have rented a space or built a space and they’re hoping to grow into that space eventually but they’re not quite ready for it just yet. 

“It’s a bit like having oversized clothes; you’ve got to wait until you’re ready to grow into them.”

Generally speaking, [subletting] as a temporary measure until you can grow into the space is usually not a great long-term strategy. You’ve got to make sure it doesn’t impact on your own patient experience, and it doesn’t impact on the reputation of your practice in any way, shape or form.

Dr Jesse Green, dental business coach, Savvy Dentist

Dental Management Expertise founder Ameena Basile says while subletting some of their space to complementary business would work well for those who have the capacity, it is not always the preferred option.

This is because often the space in a dental practice can be better utilised for maximum financial benefit by having it occupied by a dental clinician who is generating good revenue, she says.

In the event practice owners find themselves unable to secure a dental clinician, she believes the best option would be for those who are interested in subletting their space to select those working in modalities complementary to general dentistry.

These include oral surgeons, orthodontists, those who specialise in temporomandibular joint (TMJ) disorders, sleep specialists or implant surgeons.

Dr Green agrees that aside from the obvious financial benefits of such an arrangement where it could help save on overheads, the main advantage is the opportunity to drive business growth from cross referrals.

“From a dental practice point of view, the big priority would be to grow your practice to fully utilise that space. Most likely that is going to be the highest and best use of that space because you’re going to generate more money by having a dentist or a therapist or someone in there doing dentistry than you’re going to derive from the rent that comes from such an arrangement.”

Both management experts say it is sometimes a gamble entering into such arrangements because difficulties may arise when it comes to moving the tenant out should the practice wish to use the space in the event of practice growth. 

There is also the risk of the chosen tenant making a nuisance of themselves or not being liked by staff or patients while another disadvantage is that subletting to a tenant also means there’s another party to consider if practice owners want to make changes to the practice or premises.

For this reason, it is critical that practice owners considering heading down this path do their homework when it comes to selecting the right tenant to lease their space, Dr Green says.

From a dental practice point of view, the big priority would be to grow your practice to fully utilise that space. Most likely that is going to be the highest and best use of that space because you’re going to generate more money by having a dentist or a therapist or someone in
there doing dentistry. 

Dr Jesse Green, dental business coach, Savvy Dentist

“Generally speaking, [subletting] as a temporary measure until you can grow into the space is usually not a great long-term strategy. You’ve got to make sure it doesn’t impact on your own patient experience, and it doesn’t impact on the reputation of your practice in any way, shape or form.”

However, for those who insist subletting space is the way forward, Dr Green says it’s important to remember that tenant selection is only half the battle for practice owners wishing to safeguard themselves against future issues that may arise out of such an arrangement.

“Clearly you want to make sure that all the things like work, health and safety and all those other rules are observed and that there’s going to be the appropriate insurance and things in place. You’ve got to make sure that the subletting business is complying with their obligations, and you want to get some legal advice about where liability begins and ends from a work, health and safety point of view, as well as public liability.”

Basile says a well-worded written lease and seeking proper legal advice prior to signing any subletting agreement is always going to be money well spent.

Aside from specifying the length of any lease, rent increases and lease renewals, there are also a number of other factors that should be considered before signing on the dotted line, she says.

Basile advises that where possible, practice owners also need to have good clear guidelines around things such as if reception staff are included in the arrangement and specifically what support—for example, answering the phone, making appointments and taking payments—would this include. 

“It must be stated what duties would be covered or not covered in this support. Other considerations to factor in are: Would the practice require more reception staff to support the extra modality? If so, would it remain a financially viable option to rent the space? What other shared expenses would be included in the rent or would items such as utilities, cleaning supplies, toilet paper and coffee be additional to the sublessee?”

Basile says while subletting may be a viable option for some practices financially impacted by the pandemic, she strongly recommends practice owners contemplating such a move weigh up both the advantages and disadvantages of such arrangements.

“Ensure you have a good business plan to consider before making the move and do thorough investigations to ensure it is going to be a viable option before you commit.”  

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