Restrictive covenants are one of the provisions that dental practice sellers often don’t focus on until late in the transaction — and then find uncomfortable. The sale and purchase agreement will require the seller to confirm that they will not compete with the practice they have sold, not solicit its patients, and not recruit its associates or staff, for a defined period in a defined area. These are standard provisions, but their scope and duration are negotiable, and the terms agreed will significantly affect what the seller can do for years after the sale completes.
Types of Restriction
Non-compete: The seller agrees not to own, operate, or have a material interest in a competing dental practice within a specified geographic area for a specified period. This is the core restriction.
Non-solicitation of patients: The seller agrees not to actively solicit patients of the sold practice to move to a new practice. This is narrower than non-dealing — the seller is prohibited from reaching out to patients, not from treating patients who independently choose to find them.
Non-dealing: A wider form of the patient restriction — the seller agrees not to deal with named patients even if those patients approach the seller directly. Sellers should resist non-dealing provisions in favour of the narrower non-solicitation formulation.
Non-solicitation of staff and associates: The seller agrees not to recruit associates, dental nurses, or other staff from the sold practice. This protects the buyer from losing the team immediately after the sale.
Standard Parameters — and How to Negotiate Them
Duration: Buyers typically seek 3–5 years. Sellers should push for 2 years; a 2–3 year duration is usually achievable. Courts will enforce restrictions that protect a legitimate business interest for a reasonable period — but an excessively long restriction risks being unenforceable. Sellers should not assume an unreasonable covenant will be unenforceable in practice; enforcement is uncertain and litigation is expensive regardless of outcome.
Geographic scope: Restrictions are typically framed as a radius around the practice address — 1–2 miles in urban settings, larger in rural areas where the practice has a genuinely wider catchment. Sellers should push for the smallest defensible radius. Challenge restrictions that extend significantly beyond the practice’s actual patient catchment — a restriction covering the whole county for an inner-city practice is unlikely to reflect a legitimate business interest.
What counts as “competing”: The non-compete should be defined by reference to the type of dentistry the sold practice provides. A seller who goes on to provide specialist services not offered by the sold practice (orthodontics, oral surgery) has a reasonable argument that specialist practice is not competing with a general NHS/private practice. Sellers should seek carve-outs for genuinely non-competing clinical activities.
Carve-Outs to Negotiate
Continuing as an associate: A common arrangement in DSO transactions is for the selling principal to remain in the practice as an associate. This should be explicitly permitted in the non-compete and non-solicitation provisions — the seller cannot be both working in the practice and prohibited from working there.
Associateship elsewhere: Sellers who wish to continue clinical practice outside the sold business should negotiate a carve-out permitting them to work as an associate (not a principal) at a separate practice, subject to the geographic restriction.
Hospital, community trust, and salaried settings: Restrictions should typically carve out employment in salaried NHS settings or hospital and community trust dental services, which are not direct competitors to a commercial dental practice.
Earn-Out and Restrictive Covenants
Sellers who accept a DSO earn-out are effectively committed to continuing to work in or for the practice during the earn-out period. Buyers will typically require the restrictive covenant period to cover at minimum the earn-out period. This is broadly reasonable — a seller who competes during the earn-out period would directly reduce the earn-out EBITDA they are trying to maximise.
The interaction between the earn-out period and the post-completion restrictive covenant should be considered when negotiating both provisions. A three-year earn-out followed by a further two-year restriction effectively commits the seller for five years from completion.
Tax Treatment
Consideration that is specifically allocated to a restrictive covenant in the SPA is taxed as income rather than as a capital gain. Sellers should ensure that no separate consideration is attributed to the restrictive covenants in the transaction documents — all consideration should be allocated to the business assets. This is a point to raise with the tax adviser when reviewing the SPA.
Enforceability
English courts will enforce restrictive covenants that protect a legitimate business interest and are no wider than reasonably necessary to protect that interest. Courts cannot rewrite an unreasonably wide restriction — they can only strike out words where the remaining covenant makes grammatical and contractual sense. An unreasonable restriction may therefore be struck out entirely rather than modified.
The practical consequence is that sellers should not assume an aggressive buyer draft will be unenforceable — push back and negotiate in the transaction itself.
For a full guide to the dental practice sale process, see how to sell your dental practice. For guidance on the sale and purchase agreement more broadly, see the dental practice SPA.
Contact our team for a confidential discussion about selling your dental practice