In my previous article titled “The Closing in Medical and Dental Transitions,” I referenced some of the documents that may be prepared by the parties’ medical or dental practice attorneys to be signed by the sellers and buyers at the Closing. Some of these documents are exchanged in almost every Closing for dental and medical transitions such as Settlement Statements and Bills of Sale
Professional Service Agreement for the Transition Period Post-Closing
Whether additional documents are necessary and should be exchanged between the parties depends on your specific transaction and contract. For example, the parties may reach an agreement so that the selling dentist or doctor will be employed by the buyer for a transition period. As a side note, as medical and dental practice attorneys, we highly recommend having a transition period of at least 3-6 months so that the buyer could be introduce to the seller’s patients. This should drastically reduce any attrition rate that may occur so that the buyer can avoid or minimize losing patients, and revenues due to lack of familiarity with the seller’s patients. If the parties agree on a transition period, then our medical and dental practice attorneys will prepare and draft a professional service agreement for the transition period, which will be signed by the parties at the Closing.
Assignment of Lease Agreement at Closing
In most cases, the parties and the landlord should also sign a Lease Assignment to transfer the existing lease from the seller to the buyer. Working on the Lease Assignment should start in the early stages of the transaction but after the buyer’s attorney has had a chance to review the seller’s existing lease agreement.
If the lease terms were not properly negotiated (by the seller when the lease agreement was originally reached), the landlord may have retained the right to reject the sale of your practice based on landlord’s sole discretion and a lot may need to be done to obtain the landlord’s approval for the Lease Assignment, if at all possible. This is precisely why our experienced medical and dental practice attorneys communicate with the seller’s landlord early on to start the process of receiving the landlords’ approval and to handle any issues or contingencies that may arise in dealing with the landlord and the lease agreement.
Almost every lease agreement includes a provision that grants some level of control to the landlord to approve the sale of the practice and the Lease Assignment; however, if the standard for landlord’s approval or rejection of the transaction is a reasonable standard (as opposed to landlord’s sole discretion) then the landlord cannot lawfully reject its approval of the transaction and the lease assignment to a qualified buyer.
Other Documents Exchanged at the Closing of Dental & Medical Practices
In a few cases, the seller may own the real estate for the practice and the parties may reach an agreement for buying the practice as well as the office space. There should be separate contracts for purchasing the practice and purchasing the real property, however, these contracts should be contingent on each other so if for any reason one contract falls through, the parties will not be legally obligated to complete the other transaction. It is extremely rare to find a dentist or doctor who is interested in buying the office space for a practice even if the buyer finds issues with the practice and decides against purchasing the practice. Our medical and dental practice attorneys are well versed in these types of transactions and can handle your dental transitions or medical sales, so you are well protected.
Again, the documents that should be exchanged at the Closing depends on your specific contract and deal, however, the above documents are the most commonly exchanged documents prepared by the parties’ dental and medical practice attorneys at the Closing.
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