Hidden risks in serviced office agreements
- 28 February 2024
- Commercial Real Estate
This is usually a fully furnished and equipped office space that is managed by a facility management company and made available for short-term or long-term rentals to businesses, varying from one week to a year, or even longer, for example. Agreements for serviced offices are a type of licence, rather than a lease, meaning they come with less security but more flexibility.
The key features of a serviced office are that:
Business entrepreneurs are usually looking for a flexible and cost-effective office solution which a serviced office agreement can provide over a lease. Most leases are longer-term commitments with burdensome responsibilities for tenants, such as repairing and decoration obligations.
As serviced offices are usually fully furnished, it also means that there is no hassle of purchasing office equipment which needs to be moved at the end of a lease. Businesses can therefore move into these offices and start work immediately and the services of cleaning and maintaining the office spaces are also provided, so they do not have to deal with such day-to-day jobs. A serviced office agreement can also be for a very small space, numbering only a few desks for example, whereas a lease is often for a much larger space, which a start-up may not need yet.
The decision to opt for a serviced office agreement or a traditional lease depends on the specific needs and circumstances of the business. Businesses seeking a quick setup often find serviced offices to be very convenient, but as is the case with any attractive ‘solution’, there are often associated risks which licensees need to be aware of.
Agreements for serviced offices are a type of licence, rather than a lease, meaning they come with less security but more flexibility.
The specific terms and protections in leases versus serviced office agreements can vary, but there are some general differences to keep in mind.
A business should clearly understand the total cost of renting the serviced office, , and what services and amenities are included in the rental fee and whether there are any potential extra costs. Serviced office agreements are often accompanied by the owner’s hefty terms and conditions, which need to be carefully examined alongside the agreement. Such terms and conditions usually contain onerous payment requirements, such as payment by direct debit, or a reduction of services provided to the business.
The office space a business is renting will also need to be clear – the number of desks, the layout, whether the space can accommodate any future growth or changes in their business, and the notice period for having to move to another location. Permissions, such as access to other facilities like kitchen areas, or the ability to have visitors, should be well understood to ensure these are adequate. It may be, after careful consideration, that a longer terms and more formal lease is more appropriate for the needs of the business.
If you need help reviewing a serviced office agreement or a lease, get in touch with our Commercial Property Solicitors.
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Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.