Legal Steps to Buying Real Estate for a Dental Practice
Purchasing real estate for your dental practice requires coordinating due diligence, financing approvals, entity structuring, and regulatory compliance within compressed timelines that protect your deposit and preserve practice operations. Understanding letter of intent contingencies, zoning requirements, environmental reviews, and lender documentation helps dentists close transactions that support long-term growth without unforeseen liabilities or cost overruns.
Planning a dental office purchase? Call (800) 499-1474 to discuss LOI review, financing coordination, and closing strategy.
Key Takeaways for Dental Real Estate Purchases
- Entity structuring separates real estate ownership from clinical operations, typically with a holding LLC that owns the property and leases to the dental practice P.C.
- Letter of intent contingencies control risk during due diligence by conditioning the purchase on satisfactory title review, survey, zoning verification, environmental assessment, financing approval, and build-out feasibility within defined timelines.
- SBA 7(a) and SBA 504 loans offer favorable terms for dentist owner-occupied real estate but require personal guaranties, detailed lender documentation, appraisals, environmental reviews, and compliance with SBA occupancy thresholds.
Step-by-Step Timeline for Dental Office Real Estate Purchases
Dental real estate transactions typically close within 60 to 120 days from executed letter of intent to final deed recording, depending on financing complexity, environmental reviews, and build-out permit timelines.
Here is a rough timeline:
LOI Execution and Deposit (Days 1–14)
Negotiate letter of intent terms, including purchase price, earnest money deposit, due diligence period length, financing contingency, build-out allowance or tenant improvement credits, and seller representations on zoning, environmental conditions, and existing tenant leases.
Due Diligence Period (Days 15–45)
Conduct title review, ALTA survey, Phase I environmental site assessment, building inspections, zoning and use permit verification, parking analysis, review of condo declarations or CC&Rs, and financial underwriting for SBA or conventional financing.
Financing Approval and Entity Formation (Days 30–75)
Submit loan applications with business plans, tax returns, practice financials, appraisals, and environmental reports. Form real estate holding LLC, draft lease agreement between holding company and dental practice P.C., and obtain lender approval of lease terms and entity structure.
Purchase and Sale Agreement Execution (Days 45–60)
Negotiate definitive purchase agreement addressing title insurance requirements, survey acceptance, deed form, prorations of taxes and CAM charges, seller warranties, closing conditions, and post-close tenant improvement coordination.
Closing and Deed Recording (Days 90–120)
Execute deed, promissory note, deed of trust or mortgage, personal guaranty, assignment of leases (if applicable), leaseback agreement to dental practice, and SNDA agreements with any subordinate tenants. Record deed and financing documents, transfer possession, and begin build-out permitting.
Build-out and Certificate of Occupancy (Post-Closing)
Obtain building permits, complete tenant improvements, pass inspections, and receive certificate of occupancy before opening the dental practice at the new location.
Letter of Intent and Purchase Agreement Contingencies
Letter of intent contingencies protect your earnest money deposit and provide exit rights if due diligence reveals deal-breaking issues. Critical contingencies include:
- A satisfactory title commitment showing clear ownership without liens or easements that impair intended use
- An ALTA survey confirming property boundaries and the absence of encroachments
- Zoning verification for dental or medical office use with adequate parking
- A Phase I environmental assessment showing no recognized environmental conditions requiring remediation
Purchase and sale agreements specify which party bears costs for title insurance, survey updates, environmental assessments, and transfer taxes. Seller representations address zoning compliance, absence of environmental violations, condition of building systems, and accuracy of rent rolls or estoppel certificates if existing tenants occupy portions of the property.
Entity Structuring: Holding LLC and Leaseback to Dental Practice
Dentists typically purchase real estate through a separate holding LLC that leases the property to the dental practice, professional corporation, or PLLC. This structure separates real estate assets from clinical malpractice liability, preserves bankruptcy protection for real estate in the event the practice faces financial distress, and creates flexibility for future sale-leaseback transactions or property disposition, independent of practice operations.
The holding LLC owns fee simple title, signs the promissory note and deed of trust, and receives rental income from the dental practice tenant. Lenders typically require lease terms that support debt service coverage ratios, often involving long-term leases with renewal options and rent escalations.
Tax treatment and pass-through income flows require coordination with CPAs to optimize depreciation deductions, interest expense allocation, and potential Section 1031 exchange planning for future property sales.
SBA Financing: 7(a) vs. 504 Loans for Dentists
SBA 7(a) loans offer up to $5 million for real estate purchases with 10% to 20% down payments, 25-year amortization, and variable interest rates. SBA 7(a) financing covers land, building purchase, renovation costs, and closing costs in a single loan.
Both programs require personal guarantees from owners holding 20% or more equity, detailed business plans, tax returns, practice financial statements, appraisals, environmental assessments, and compliance with SBA occupancy requirements—typically 51% owner-occupied use for the first two years.
How Dental Real Estate Attorneys Support Office Purchases
Wood & Delgado guides dentists through letter of intent negotiation, due diligence coordination, financing documentation, entity formation, and closing execution for dental office real estate purchases.
Legal support for dental real estate transactions includes:
- LOI and PSA Review: Negotiating purchase price, contingencies, deposit terms, build-out allowances, closing timelines, and seller representations on zoning, environmental conditions, and tenant leases
- Due Diligence Coordination: Reviewing title commitments, ALTA surveys, Phase I ESAs, zoning letters, condo declarations, and building inspection reports to identify risks and negotiate resolutions
- Entity Structuring and Leaseback: Forming real estate holding LLCs, drafting lease agreements between holding companies and dental practice entities, and coordinating with CPAs on tax elections and transfer pricing
- Financing Documentation: Reviewing loan commitments, promissory notes, deeds of trust, personal guaranties, and lender requirements for SBA 7(a) or SBA 504 compliance
- Closing Execution: Coordinating title company, lender, and seller’s counsel to execute deeds, record financing documents, transfer possession, and resolve last-minute issues
Coordination with commercial brokers, architects, and lenders ensures timelines align and build-out permits proceed without delay after closing.
FAQ for Dental Office Real Estate Purchases
Should I Buy Through a Holding Company and Lease to My Practice?
Dentists typically purchase real estate through a separate holding LLC that leases to the dental practice P.C., separating real estate assets from clinical malpractice liability, preserving bankruptcy protection, and creating flexibility for future sale-leaseback transactions or property sales independent of practice operations.
How Do Restrictive Covenants Affect My Dental Office Purchase?
Restrictive covenants in purchase agreements or condo declarations may impose radius restrictions preventing you from opening additional locations nearby, exclusive use provisions protecting competing tenants, hours of operation limits, or signage restrictions. Negotiate carve-outs for expansion plans and verify signage rights support practice visibility before closing.
Do I Need an ALTA Survey and Title Insurance?
ALTA surveys confirm property boundaries, identify easements and encroachments, and verify access rights, while title insurance protects against undisclosed liens, boundary disputes, or defects in seller’s chain of title—both are standard requirements for lender financing and prudent risk management.
Secure Your Dental Office Investment
Real estate purchases for dental practices require coordinated legal, financial, and operational planning to close transactions that support long-term growth without unforeseen liabilities. Call (800) 499-1474 to discuss LOI review, due diligence strategy, and financing coordination that protects your investment and practice continuity.