If you are looking to share your office with another company one of the most important things you will need is a service agreement. Sharing your spare office space simply makes sense for many business owners but it can be difficult to know where to start.
Before You Rent
There are a few key questions that you must ask yourself before advertising your spare office space. Contrary to what most people think you can rent out spare office space without having to own it first. However, if you are leasing your office space, the first thing you should do is check your existing lease agreement to see if you are allowed and whether there are any restrictions . For example, some commercial leases may require for previous consent before you can advertise your spare desk space. One of the most important things you need to define before advertising your spare office space is whether you are looking to share with a company or transform your business premises into a coworking space.
Why should you have a service agreement?
Put simply a service agreement puts everything on a formal footing, establishing details of the workstations to be used, the period they are available and the licence fee. However there is some confusion about service agreements, leased agreements and membership agreements. So what sort of agreement should you have and what are the differences?
A service agreement is commonly used when you are looking to share your office with another company and typically has a maximum of 4 parties. It clearly defines a right to use a set area and resources but does not convey ‘property’ or grant ‘rights’ over a defined area. In other words a service agreement is legally distinct from a lease because it is not governed by property or landlord/tenant law. As a result lease agreements are more rigorous legally and consist of more thorough and clearly defined terms.
What should a service agreement include?
A service agreement is a contractual licence which lays out the relationship between the ‘Provider’ (the person who is granting the right to share) and the ‘Sharer’ (the individual or company sharing the office space). If there is more than one ‘Sharer’ each sharer must be named in the agreement to ensure they remain joint and individually liable under the agreement. This agreement provides the sharers with a set number of workstations but does not have to specify their location through floor plans. This is very important as it means a provider retains the right to alter workstation locations.
Shared office service agreements should include:
- A definition about the space to be shared (floor size, number of workspaces etc)
- Layout the licence fee (how much you are charging for the space)
- Any other charges
- What services are included
- What services may be available for an additional charge.
It is important to note that a sharer must pay VAT on the licence fee regardless of whether the licence fee is all inclusive or features additional charges for elements such as services and utilities.
In Summary
Regardless whether you own or rent your office space most companies will be able to share their office space with other companies or contractors. The main reason why a company may not be able to share their office space comes down to their lease agreement with their landlord. A shared office service agreement is essential paperwork required by state and tax authorities outlining fees and charges alongside liability and insurance. Sharing office space can be a great way for companies to optimise their real estate portfolios, to better utilise the office space they have while opening themselves up to networking and collaboration opportunities.
