If you’re considering a shared workspace – such as a room, office or clinic – you may think you need to set up a full retail or commercial lease. But you don’t have to lock yourself and your tenant into a rigid lease agreement to share a space cooperatively. Instead, you can set up a licence to occupy with a Shared Office Space or Licence Agreement.
What’s the difference between a lease and a licence?
A lease is a registrable interest in the property in exchange for rent and is for the exclusive use of the tenant for a specified term. A licence, on the other hand, gives the licensee a right to use a space in a particular way, for a fee. Both have their positives and negatives, but a licence may be highly beneficial for both landlords and licensee in some cases.
Use a Shared Office Space Arrangement when you want to rent a commercial space to somebody (called a licensee) for their non-exclusive use. This space could be a space that’s shared among a number of licensees, or one that the landlord can share or freely access. A ‘space’ can include (but is not limited to):
- a room;
- shared office space/work space (such as in a factory);
- an area in a retail store, a clinic, a chair (such as a hairdresser chair);
- a booth/kiosk;
- storage space in a garage; or
- a studio.
A lease, on the other hand, gives the tenant exclusive access to the premises and provides them with an interest in the property that is only one step down from ownership. Obviously, this is not ideal for a landlord who requires ongoing access to their property or wishes to share the space.
An example of how a Shared Office Arrangement works
Consider a pharmacist who rents out space (often a small room or a partitioned area) to a nutrition consultant. The licensee (the nutritionist) will be able to work from this space within the premises, but the licensor (the pharmacist) will retain access.
The nutritionist (the licensee) pays a licence fee to retain this space for ongoing use, and the licence will usually include facilities, amenities and outgoings. The licensor and licensee would share things like the toilets, storage areas, waiting areas, kitchen area, common areas and reception areas (facilities), as well as refrigeration, tea and coffee making facilities, laboratory equipment (amenities) etc. depending upon the business and needs of the licensee.
Want more articles like this? Check out the financial management section.
While the licensee would be able to use these facilities and amenities, they would not be required to pay for rates or electricity for these, as the licence fee would cover their share of outgoings.
The convenience of a Shared Office Arrangement rests primarily with the shared use – on days where a licensee isn’t using the shared workspace, their space can be used by the landlord or another licensee.
- The Landlord benefits by earning extra income, offering diversity in complementary products or services that may improve their business, or filling an area that would otherwise be vacant.
- For the licensee, the benefits are flexibility, not being tied down to a lease, not paying dead rent for space they don’t use and – as with the landlord – being able to offer a cooperative product or service that may be complementary to their own product or service.
Unlike a lease – which can heavily restrict both landlords and leases in the above cases – a licence does not fall under the legislation of a residential, commercial or retail lease, so it’s a much more flexible arrangement and can be highly beneficial when both parties desire flexibility.
Caution needs to be taken, though, as some landlords have been known to pass off leases as licences, which is illegal. Regardless of what a landlord calls a lease, it’s still a lease and is bound to the same legislation and regulations, so just calling a ‘lease’ a ‘licence’ is not sufficient by law. A licence is a far simpler document that has terminology and language that is significantly different to that of a lease, so really, there should be no confusion if you use the correct documentation!