As we slowly start pulling ourselves out of the chaos the COVID pandemic has caused, many business owners are looking at how they can cut costs and streamline their services without restricting their capability to complete existing and future work opportunities. One solution that more and more companies are turning to is the option of sharing office space with other companies or consultants.
There are many misconceptions about what a shared office space should be. For some; the mention of coworking or shared office space immediately conjures up images of vast, empty spaces with rows upon rows of desks; however, this does not have to be the case.
The term ‘coworking space’ can cover a wide range of setups. From an open space with dedicated desks and break out areas to a more structured office with private, and public breakout spaces shared between a handful of companies, the options are endless.
So Why Is A Service Agreement Important?
Service agreements help put your working relationship on a formal foot, protecting all parties involved. This security is achieved by clearly setting out what is included as part of the licence. For example:
- What is the area of the space to be shared?
- What facilities can be accessed?
and
- Are there any additional costs for the use of specific resources?
It is important to highlight that a service agreement is not a lease of property; it is a contractual licence. It is important to note that this paperwork is required by law and helps avoid complications with liability and insurance.
What Is The Difference Between A Lease and A Service Agreement?
Put simply a service agreement is a licence and therefore does not grant rights over a defined or fixed area. This type of agreement provides the sharer with a set number of workstations but does not need to specify an exact location. Service agreements do not need to include a plan and as the sharer, you can reserve the right to alter the locations of workspaces; which is a key difference between an agreement and a lease.
What Is The Difference Between a Coworking Service Agreement and A Shared Office Agreement?
There is a common misconception that a coworking services agreement and a shared office service agreement are the same and interchangeable but this only leads to confusion. As a result, it is vital to ensure you know what your service agreement includes and what your rights are. When it comes to a service agreement the type of shared space will impact on the language used for example, in a coworking service agreement the person who is granting the right to share is called the Provider. This reflects that the person or company sharing the office space may not be actively using the area themselves. A great example of this would be companies like Regus.
Alternatively, if a company is looking to share office space that they also work in they are then referred to as a ‘Sharer’. It is important to note that all parties/sharers must be named in the service agreement as they remain joint and severally liable. That said, this type of agreement typically has a maximum of 4 identified sharers regardless of whether they are individuals or a company.
What Does A Service Agreement Need To Include?
Regardless of whether you are looking to share your office space or create a coworking space, it is always best to keep your service agreement general, clear and simple. Key things to include in any service agreement includes:
1. A Description of Services
What is the tenant entitled to including the services available and the size of space. It is important to note you do not need a floorplan of the office space outlining the allocated office/desk space.
2. Prohibited Use
This details the actions which are not allowed under terms of the lease and can be used as terms for termination of the service agreement.
3. Duration
Outlining how long the user is entitled to use the services and when the time period can be reviewed.
4. Facilities
There is a wide range of areas that should be covered in a service agreement. Typical topics should include:
- Whether the space is furnished
- Is there a dedicated phone line?
- Will internet access be provided?
- What office support is available such as cleaning, property management, it support etc
- The availability of amenities such as kitchen facilities, access to printers, scanners, overhead projectors and private meeting or office space.
5. Code of Conduct
This extends to digital and well as physical space clearly setting out what behaviours are acceptable. This should include policies on:
- GDPR
- Hacking and data theft
- Physical damages
- Consideration for other users
- Unlawful content and communications such as spam emails, pyramid schemes and malware (both within the office community as well as externally)
6. Costs
Detailing the cost of the licence fee and any additional charges which can be incurred or have been previously agreed. It is important to clearly define all costs in a formal document to protect all parties involved. Topics that should be defined include:
- Is billing weekly or monthly
- Will billing be at the start or end of the week/month?
- Are there additional costs for use of services including a breakdown of all optional add on costs.
- Is the use of amenities and utilities incorporated within the basic licence fee, a fixed price which has been previously agreed or “add on’s” billing on pay and you go service?
- What interest will be charged on overdue payments
In Summary
Not only is a service agreement required by law; it protects all parties involved by clearly defining costs, facilities and liability matters to name a few. The variations available in a service agreement help the provider, or sharer, to offer a flexible arrangement to those they share the space with.
This customisation allows companies/individuals to only pay for the services that they need and want, supporting current trends for ‘financial streamlining’. Economic and cultural trends are transforming how we work, with businesses finding support and success in collaborative projects proving that it is about the skills and expertise your business has rather than how big a staff or fancy an office you own.
