The Dental Lawyer | Exclusive and Non-Exclusive Listing Agreements

I was contacted last week by a dentist who wanted me to broker the sale of their dental practice. To maintain confidentiality, I can’t really divulge too many details about the practice or the specific situation, but suffice it to say that the dentist in question got wind of my services and understood that I was offering more for less as compared to some competitors. At the time I was contacted, a “letter of intent” to purchase had already been drafted by an attorney and delivered to the selling dentist. We had a short conversation about the practice and the buyer (an associate which the seller had placed himself). Then the seller dropped a bomb: he had already signed a listing agreement with a different practice broker. At that point I agreed to look at the both the letter of intent and listing agreement, with the knowledge that had an Exclusive Listing Agreement been signed I would not be able to broker the transaction. Fortunately for me, as both a trained broker and licensed attorney, I could still help this individual on the legal side of the transaction.

In the world of dental practice brokering listing agreements generally come in two forms, Exclusive Listing Agreements, and Non-Exclusive Listing Agreements. In many ways this is similar to real estate sales. The Exclusive Listing Agreement is the most common agreement I’ve come across when dealing with dental practice brokers and it’s no secret why. While each broker’s agreement will vary slightly, an Exclusive Listing Agreement entitles the broker to his/her commission so long as the practice is sold while the agreement is in force. Many Exclusive Listing Agreements provide that the broker will receive a commission even after the term of the agreement has expired if the buyer was introduced to the seller through the broker. Most Exclusive Listing Agreements oblige the broker in only a very minimal way, thus making these agreements difficult to circumnavigate on traditional breach of contract grounds. Obviously, brokers like these agreements because they get paid even if someone else finds a buyer.

A personal note: while I see the appeal for the broker to have an Exclusive Listing Agreement, I liken these types of agreements to tenured teachers and professors, in that, "they" are getting paid regardless of how good a job "they" do. A dentist who is signing an agreement should always bring the agreement to an attorney (hopefully the attorney who will also represent the dentist in the sale) and carve out exceptions in the exclusive agreement for certain common situations, such as where the seller identifies the buyer through his own efforts, or where the sale price is below a certain threshold.

The other type of agreement in practice sales world is a Non-Exclusive Listing Agreement, which in reality is a Modified Exclusive Listing Agreement or a “Limited Listing Agreement.” These types of agreements make the brokers commission conditional i.e. the broker will have to do certain things to earn the commission. Commonly if the buyer is identified through the efforts of the seller alone the broker’s commission will be reduced or, depending on the terms of the agreement, not be owed at all. This type of agreement might also make a commission contingent upon the sale price meeting a certain level. Because of the risks involved most brokers will almost always prefer an Exclusive Listing Agreement.

As an independent contractor of Henry Schein Professional Practice Transitions, I am accommodating to the request of a Non-Exclusive Listing Agreement, however there must be some give and take. For example, because of the security provided by an Exclusive Listing Agreement, most practice brokers will “eat” the cost of marketing the practice when they type of agreement is in place. On the other hand, if a broker is willing to sign a Non-Exclusive Listing Agreement the broker will likely look for some money upfront for marketing costs, an expense which would be sacrificed if the seller were to enter into a deal without the broker (and still within the terms of the listing agreement). Because the broker may not receive a commission on a Limited or Non-Exclusive Listing Agreement, many brokers will request some type of accommodation in exchange for entering into these types of agreements.

Depending on the market and the individual practice both types of agreements have their utility. Of crucial importance to any dentist entering into a listing agreement is a clear understanding of the agreement's terms. An attorney’s review of a listing agreement should be short and very inexpensive…but could be extremely valuable to the seller. Also, most terms to the listing agreement are negotiable and an attorney should quickly be able to point out a few areas where the agreement could be modified and save seller a significant amount of money.

One final note. In my opinion, when selling a dental practice, a broker is sometimes necessary and always helpful; an attorney is always necessary (and if you listen to some brokers, only sometimes helpful). My point is this...if you are selling your dental practice, you are going to need an attorney, so best hire one early (hopefully on a flat fee) and use them as much as possible.

Information I post in this blog is not intended to be legal advice and should not be relied on. Nothing contained in this blog shall create an attorney client relationship. If you’re a dentist and you have legal questions you should contact licensed attorney in your state.

The Dental Lawyer | About the Author

At the time of the writing of this blog, I am a 27 year old attorney practicing law in New York. I am based in Albany, NY but because of the nature of my practice I take cases from across New York State. I graduated from the Albany Law School, cum laude, in 2010 with concentrations in Tax Law and Estate Planning. After and during law school I worked for a local law firm, but decided to leave to pursue my own endeavors.

I am also a Practice Transition Consultant with Henry Schein Professional Practice Transitions (PPT). Henry Schein is the United State’s largest supplier of equipment and supplies to medical, dental, and veterinary offices, and PPT is a subsidiary of Henry Schein focused on the needs of dentists and dental specialists who are considering buying or selling a dental practice. PPT also focuses on as other specialized needs of dentists like retirement and estate planning. As a Practice Transition Consultant I am a sort of independent contractor for PPT.

In addition, I am also President of Dental Transitions of Upstate New York, LLC. Initially I formed Dental Transitions of Upstate New York, LLC as a vehicle to hold my contract with PPT and to separate my practice brokering business from my legal practice. Soon, however, it became incumbent upon me that in addition to offering legal and practice brokering services to dentists, there is also a market for other non-legal services required by dentists and dental specialists. Dental Transitions of Upstate New York, LLC has become the entity through which I’ll offer some of these other services, such as Practice Management Consulting, Business Financial Consulting, Accounting Service, and Associate Placement Services.

In short my goal went from developing a legal practice that would be one stop shop for the needs dentist, to just developing a one stop shop for all the needs of dentists.

Dental Lawyer Blog | New Beginnings

The dental lawyer blog is meant to be chronicle of my development of two businesses: (1) a law practice devoted to the needs of dentists, and (2) a non-legal consulting firm which specializes in the business needs of dentists. Because of the rules pertaining to the practice of law, these businesses must be separate and distinct.

Aside from making public my struggles as a young idealistic attorney, this blog hopefully will also serve as an open source for dentists and lawyers seeking information relating to the dental field. I would caution, as I probably will on every posting, that the information I post in this blog is not intended to be legal advice and should not be relied on. Nothing contained in this blog shall create an attorney client relationship. If you’re a dentist and you have legal questions you should consult licensed attorney. If you’re a lawyer with dental questions, just remember that flossing really does make a difference (though in all seriousness I am very open to inquiries from colleagues including those about the nuances of the dental industry and specific legal problems the dentists and dental specialists run into).