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Co-working Agreements

These days, flexibility is the name of the game when it comes to working in a wide range of industries. Inspired by companies like Impact Hub and WeWork, entrepreneurs and building owners (or even tenants) with extra space are looking to cash in on the co-working space movement. While entering the shared space industry involves due diligence and some vision, a co-working operation can turn profitable relatively quickly once all the pieces are in place.

What is Co-working?

Wikipedia defines co-working as, “an arrangement in which several workers from different companies share an office space, allowing cost savings and convenience through the use of common infrastructure, such as equipment, utilities, and receptionist and custodial services, and in some cases refreshments and parcel acceptance services.” Co-working can be a great idea but it must be implemented properly.

Zoning Restrictions

The first consideration is whether the zoning code (as well as the lease agreement if you are a tenant) where the building or property is located allows for short term rentals and if so, if any types of land uses are prohibited. For example, a property may be zoned for permissive primary use as an office building but uses such as artisan manufacturing or as an event facility may prohibited. The zoning laws will determine whether co-working uses are allowed, and if so whether any restrictions exist for the types of uses for the space.

Types of Co-working Contracts

Unlike renting out a room in your house, or the entire house itself, work space agreements involve a unique, temporary aspect that are usually more suitable to licensing agreements versus lease agreements. Lease agreements convey a property interest to lessees that gives tenants exclusive (albeit limited duration) possession of the leased premises. Lease agreements are governed by cumbersome landlord-tenant law and allow landlords to access the property only under specific circumstances and only after meeting conditions such as advanced notice. Licensing agreements, on the other hand, provide licensees a revocable, non-possessory right to a licensed area of a property. The licencor retains absolute control over its premises at all times. Licensing agreements are governed by contract law, which means the contracting parties can freely incorporate terms and conditions such as termination on short notice, little or no insurance, and per-use fee structures. Simply stated, licensing agreements provide for flexibility, which is a key feature of work space arrangements

Pricing and Amenities

The nature of your space and vision for the work space environment will inform the fee structure for licensees. Spaces offering the basics such as desks, internet, and restrooms will cost less than spaces with conference rooms, self-serve bars, and swanky furniture. Additionally, you will need to decide whether a monthly fee or per-use fee structure makes the most sense. In either case, co-working fees are almost always inclusive of utilities like internet and electricity.

Insurance and Security

Regardless of whether you will dedicate your entire building or just a portion of your building to co-working spaces, you will need to address access, security, and insurance. Access control can take the form of a receptionist or an access code entry and exit system. Additionally, a security system is essential to ensuring the safety of your staff as well as the work space users. You will need to consult with your insurance provider to advise them of the intended use and to understand what provisions they will require as a result.

As the trend of co-working spaces continues to rise, now is a great time to see whether you can cash in on this type of use for your extra space. Call us today to discuss the unique—but often not insurmountable—legal issues that accompany short term uses.

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Contact us or give us a call at 505.715.5700

Law 4 Small Business, P.C. (L4SB). A little law now can save a lot later. A Slingshot company.

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