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What are the legal considerations for co-working spaces?

I love a co-work space!  If only confidentiality requirements didn’t stop me working in a one.  They are popping up more and more as a solution for small businesses and expanding to shared spaces for trades and creative businesses. There are key legal concepts you need to understand when running a co-work space of any form.

  1. Permission to sub-lease

If you own the building that you will run the co-work space from then life is easier. You are the boss of the building!  If you are renting the premises then you must ensure that you have permission from the landlord to sub-let in your lease.  A standard commercial lease will generally exclude the ability to sub-lease space to others, so you need to be careful.  There may be a clause that you can sub-lease if the landlord approves the sub-tenant.  This isn’t practical in a co-work space so you really do need express permission from the landlord.

  1. Licensing

There are laws that can apply to tenancies, especially retail tenancies, which give the business tenant a lot of rights.  These includes having minimum term leases and the freedom to run a business without intervention from the landlord. The alternative for a co-work space is to ensure that you operate under a licensing structure, where you provide space to a business under a short term licence (eg. up to 12 months).  This ensures that you aren’t caught accidentally providing a tenancy arrangement which will have less flexibility for you as the co-work space owner.

  1. Terms of Use

The licence under which people can use your space should clearly set out the legal terms and conditions that come with using that space.  You will need to think about things such as what fixtures and fittings can be added to the premises, and whether you are providing facilities with the space such as internet, electricity etc.  The terms of using the premises need to be legally binding regardless of whether someone is purchasing a membership for annual or monthly use or is hot spotting for a day.

  1. Community Guidelines

I assume that you want the co-work space to operate in a friendly manner and you want people to keep the noise down, and the common areas tidy.  Having lists of rules or guidelines in your legally binding terms makes it cumbersome and inflexible for change.  I recommend that you keep your guidelines separate, but that compliance with the guidelines is a legally binding term of using the premises.  This is important so that you can have the right to eject any problematic users.

  1. Insurance and risk management

Ultimately you are in the business of providing a space.  This means that you are responsible for the safety of all of the people that attend the premises, including any visitors of your members.  Insurance is a no-brainer, but your terms and community guidelines also play a big role in minimising your risk.  You will need to have processes in place for dealing with accidents and emergencies so that everyone knows what is expected and what needs to be done.  You also need to make sure that any terms in your insurance policy are passed on to the others in your space. If there is anything that your insurance doesn’t covered, you need to make that clear to others or you will wear the risk of any gaps.

Running a co-work space is a great value to your community but it shouldn’t be undertaken light-heartedly as there are important legal aspects you need to be aware of.  Call me for a free 30 minute consultation to find out more.

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