Before You Sign or Sell: What Really Stays with a Dental Practice

When you're buying or selling a dental practice, one key issue is often misunderstood—and it can cost tens of thousands of dollars if overlooked: what actually transfers in the sale?

Many dentists believe that everything they've invested into their space - whether it’s cabinetry, equipment, or operatory upgrades - automatically moves with them, or adds value at sale. But the truth lies in the fine print of your lease and how the practice’s assets are defined.

At Meridian Sales & Appraisals, we specialize in the valuation and sale of dental practices, and we’ve seen how confusion over leasehold improvements and tenant fixtures can lead to overpricing, buyer hesitation, or unexpected post-sale costs.

Here’s what you need to know.

Understanding the Difference: Leasehold Improvements vs. Tenant Fixtures

When preparing to sell your practice - or assessing one as a buyer - it's essential to understand what's considered part of the business versus what belongs to the landlord.

Leasehold Improvements (Stay with the Landlord)

These are permanent changes made to the physical space. Even if the dentist pays for them, these modifications typically become part of the building.

Examples include:

• Flooring (tile or carpet)
• Interior walls or partitions
• Built-in cabinetry
• HVAC or ventilation systems
• Plumbing and electrical modifications

These elements usually do not transfer with the sale unless specific lease terms say otherwise.

Tenant Trade Fixtures (Transfer with the Sale)

These are removable items used to operate the practice. They are typically considered part of the dental practice's value and can be included in the sale price.

Examples include:

• Dental chairs and delivery systems
• X-ray units and imaging equipment
• Sterilization units and mobile cabinetry
• Computers, IT infrastructure, and monitors
• Exterior signage (if removable)

These fixtures are often the cornerstone of a practice valuation and play a significant role in determining market value.

Why Buyers and Sellers Must Pay Attention

When Meridian conducts a dental practice appraisal, we ensure that assets are correctly classified. Overstating value by including leasehold improvements as practice assets—or understating value by overlooking trade fixtures—can lead to:

• Inflated or deflated purchase prices
• Bank financing issues (if the valuation includes items not owned by the seller)
• Disagreements during the transition
• Delays in closing

For example, a seller may believe their $80,000 in cabinetry adds full value to the sale, while the buyer’s lender views it as a leasehold improvement that doesn’t contribute to the practice's transferrable worth. Without clarity, deals can fall apart.

What Should Be Included in a Practice Appraisal?

A proper independent dental practice appraisal, like the ones provided by Meridian, will:

• Break down the value of equipment and trade fixtures separately from leasehold improvements
• Identify which assets are included in the sale
• Flag leasehold investments that might require make-good clauses or cannot be transferred
• Adjust valuation accordingly based on ownership and removability of assets
• Ensure buyers understand what they are acquiring—and what they aren’t

This helps both parties avoid misunderstandings and ensures the appraised value reflects the true, transferable worth of the dental practice.

How Leasehold Improvements Affect Practice Value

It’s important to note: leasehold improvements do not typically transfer value to a buyer in the same way dental equipment does.

However, they may still affect marketability in the following ways:

• A modern, turnkey clinic is more attractive to buyers
• Buyers may be willing to pay a premium for move-in ready conditions
• Some may view recent renovations as a sign of stability and investment

But without ownership rights, sellers should not expect full return on their renovation costs during the sale. And buyers should understand what they’re actually acquiring.

Tips for Buyers and Sellers: What to Clarify Before a Sale

Sellers:

• Review your lease before listing the practice—know what you legally own.
• Make a clear list of included equipment and fixtures for potential buyers.
• Understand that leasehold improvements may not increase sale value directly.
• Avoid overpricing based on upgrades that remain with the landlord.

Buyers:

• Request a detailed asset list that separates removable equipment from leasehold improvements.
• Review the seller’s lease to confirm rights to any fixtures included in the sale.
• Be wary of paying extra for items that will legally stay with the landlord.
• Work with an appraisal firm (like Meridian) that can assess fair market value with clarity.

What About Restoration Obligations?

Some commercial leases include “make good” clauses that require the tenant to restore the space to its original condition when leaving. That means:

• Removing built-in structures
• Undoing plumbing or electrical changes
• Paying for restoration work that can cost tens of thousands

This is crucial for buyers to consider, especially if the seller will be vacating soon. You don’t want to inherit a space that’s suddenly stripped down to drywall—or a legal obligation to restore it.

Meridian ensures such risks are accounted for during the appraisal and buyer review process.

Bottom Line: Know What You're Buying. Know What You're Selling.

In every dental practice sale, there’s more than meets the eye when it comes to physical assets. A clear understanding of what stays, what goes, and what’s truly owned can mean the difference between a smooth sale and a costly mistake.

At Meridian Sales & Appraisals, our independent dental practice appraisals give you:

A clear breakdown of all included assets
Accurate, fair market valuation
✔Guidance on how lease terms affect value
Support during the transition process

Planning to Buy or Sell a Dental Practice?

Let Meridian guide you with confidence. View available practices at www.practice4sale.ca or contact us for a confidential consultation.

We’re here to ensure your investment is protected—and your next move is well-informed.

Alan Rustom