In our previous update, we highlighted some of the ways in which the current overflow of empty commercial space in our towns and cities might be used. In this update, we discuss one of those possible uses in more detail: the emerging topic of co-working.
Co-working over the last decade has become more prominent in the marketplace, leading to an explosion in empty buildings being turned into co-working or flexible workspaces. The ideology being that like-minded people share working space but without the financial ties and commitment of a lease, which is becoming more appealing to larger well-established companies, not just start-ups and one-man bands. The owners and managers of vacant properties are also seeing the benefits of the concept, particularly to avoid empty building rates.
From a legal perspective, the issues behind flexible spaces haven’t been very well publicised. A quick Google search brings up limited results for any landlord or business on either side of the negotiation concerned about the legal implications and potential pitfalls.
Co-working spaces are offered under a wide range of different models and agreements. Licences, service/membership agreements and Tenancies at Will are popularly used. However, there isn’t a ‘one size fits all’ solution; it is important that the agreement being proposed is the right one to protect your business and the space being offered.
The type of agreement required will depend on the type of space and services provided, as well as the legal interest you have in the property itself (particularly if you only have a leasehold interest, with a limited term remaining, and need to return the property back to the landlord at the end of the lease term).
Service or membership agreements
Many businesses use service agreements, but is co-working really a service?
Some organisations promote co-working spaces as providing more than just a space to work. It’s not just a temporary desk being offered, but also other amenities and services such as internet connection, communal and social areas, and access to gyms. When these services are offered, a membership or service agreement may be appropriate (think memberships to use gyms or golf courses all over the country). However, care needs to be taken; the lines may become more blurred when a physical ‘space’, such as a small locked office or a particular set of desks within a larger unit, is on offer.
Licences to occupy
Licences can be helpful for regular ‘hot-desking’ type spaces in a particular venue. From a legal perspective, care should be taken not to allow the user to use the same hot desk each time. To avoid this, agreements may contain clauses requiring the occupier to be moved to different units and/or space at any time – this keeps the agreement flexible as is intended. However, often the parties do not adhere to the arrangements contained in their agreements. If a user always uses the same hot desk/room (whether intentionally or not) and there is later a dispute over the agreement, the occupier could argue they have never been asked to move and have exclusively occupied a space in excess of 6 months. This could give rise to a long and expensive legal argument as to whether the occupier has a statutory protected lease!
Tenancies at Will
When small offices or exclusive occupation of space, with permitted branding for the occupier, is provided, the use of a licence will not be appropriate. In such circumstances a simple Tenancy at Will may be the preferred solution – providing a tenancy on a temporary basis which can be terminated ‘at will’ i.e. on immediate notice by either party.
So, in summary, these are examples of some of the options and issues to consider when providing or leasing a co-working or flexible workspace. Using the wrong agreement could lead to issues for both landlords and the occupying business itself. It is essential that agreements are tailored to each specific situation.
If you require any assistance or any further information in relation to the agreements to be used for co-working, please get in touch.