After months of searching, you’ve finally found the perfect buyer. You’re ready to sell your practice, hop on a jet to the Bahamas, and enjoy some well-earned rest. But just before the deal can close, your lawyer calls with bad news: your lease doesn’t allow you to reassign it. What now? You’re ready to move on, but instead, you’re stuck fulfilling the obligations of the lease you signed years ago.
Whether you’re retiring, relocating, or selling your practice, the ability to reassign your lease can make or break the deal. This is a nightmare scenario for many doctors, but it’s completely preventable by making sure your lease includes an assignability clause.
Defining Assignability
Assignability is the right to transfer your lease obligations to another party. Put simply, it allows you to hand off your lease to another tenant. The new tenant then assumes partial or full responsibility for paying rent and following the terms of the lease. This matters because much of your practice’s value is tied to its location. If a buyer cannot assume control of the lease, a sale or transition becomes much more difficult or even unrealistic.
Assignability is not only important when you are selling your practice. There are many situations where it plays a critical role. For example, if you bring on a new provider or partner to take over part of the space, the lease may need to be reassigned to them. Or consider what happens if you need to relocate before your lease term ends. In that case, you will need the ability to transfer the lease to someone else.
What Assignability Looks Like In Leasing
The way assignability is written into leases can vary from case to case. However, just because your lease mentions assignability does not mean you can transfer it to anyone you choose. Lease assignments require the landlord’s approval, which makes sense since they are the ones who will ultimately deal with the new tenant.
That said, how approval is addressed in the lease makes a big difference. If the language states that approval is at the landlord’s “sole discretion,” it is a major red flag. This gives the landlord complete control over whether you can transfer your lease. They can reject your request for any reason or no reason at all, which can be just as limiting as having no assignability clause in the first place.
Instead, you want the lease to say that approval cannot be “unreasonably withheld.” This ensures a fair process and gives you more security when the time comes to transfer your lease to another party.
Conclusion
Assignability may seem like small print in your lease, but it can have a major impact on your practice’s flexibility, value, and future plans. It is in your best interest to make sure your lease includes a clause that prevents your landlord from unreasonably withholding approval for a reassignment.
If you are searching for a new space or approaching a lease renewal, consider working with a commercial broker who can negotiate with the landlord on your behalf. Having this important clause in place will protect your options and give your practice room to grow or transition when the time comes.
