6 essentials to a good coworking agreement

essentials of a coworking agreement

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Previously we examined some of the legal issues you should examine before starting a coworking space. Now we look at some of the aspects of the user agreement that you need to consider.

1. Lease or Service agreement

Be clear about the type of engagement you want with the residents — do you want to sub-lease the property to your residents or you want them to provide the co-working space experience as a service. Sub-leases involve parting with the rights on the property and would need you to have the right to sub-lease on your original agreement, while a services agreement would be restricted to the services provided.

Lease agreements generally give more rights to the lessee (and sub-lessee) with respect to the use of the property and are more difficult to terminate. License agreement on the other hand provide limited rights to the user and does not get any rights on the property. Based on the type of engagement, choose your form of agreement, but clear on the duration of the agreement.

2. Minimum Level of services

A co-working space is more than just the providing some quality workspace. Make sure your agreement includes the details of the number of seats, internet speed, download limits, access to the meeting room etc. Disputes with the users normally arise with respect to additional users, temporary interns etc, so it’s better to have it all covered up front. The users do expect that you will comply by your promises and be prepared to have back up plans to keep your users satisfied. Some users may demand penal clauses for non-compliance of any of the terms, so negotiate hard.

3. Price

It’s all about money, honey! Whether you accept payments via cash, online transfers or via bitcoins, be specific about the charges. If you charge more for high speed internet, or for video conferencing put it in the agreement. Taxes may change over time, so ensure that agreement points it out clearly. If you intend to increase prices periodically, then the agreement should clearly spell out how much and when the escalation will kick in. You can find details of price and amenities on Sneed.

4. Code of conduct

This is a tricky one. People from diverse backgrounds will be working together at your co-working space — different types of businesses, work timing, client visits etc will mean that you will need to set some type of Do’s and Don’ts to everybody their individual space. As the service provider, you may be the person adjudicating on certain small matters, but then there are those that are illegal and requires immediate action — Racist slur, harassment, threatening behavior etc. These are core values around which the co-working space is built and you need to communicate it firmly to the users that violating these would not be tolerated.

5. Insurance

Disasters can strike despite our best efforts, and thankfully there is one way to compensate for any losses that we may suffer — insurance. As a space partner you can insure the assets that you own, but what about the assets brought in the user? If your insurance policy covers all these assets, great, but generally, you would expect them to get their own insurance on their assets. You can facilitate them to get an insurance easily and they would appreciate you for that, but be clear as to your liability in case of any damages due to electrical surge, theft etc. One never hopes to call in the insurance company, but if you have the right policy, at least you can still call them.

6. Breakaway / Termination

When nothing works, terminate the agreement. While most co-workers will break away for reasons other than being unhappy with your services, the agreement needs to codify the terms of termination and the duties and responsibilities of each party when that happens. So typically, you may want to cover issues like the lock-in period before which an agreement cannot be terminated, notice period, treatment of deposit etc. Sure, no one ever wants to read these clauses or wants the other the point to a clause stated here, but your agreement should still have them all.

As the owner of a co-working space, this is the most essential agreement you will sign, so it makes sense to invest a fair amount of time, effort and money to frame the right template. And yes, be aware that the agreement that you sign with each client may differ slightly and you will need to have good way of tracking them. Happy Co-working!

Disclaimer: This blog is for information purposes only and does not constitute legal advise. Service agreements may require you to weigh in multiple factors and you should be drafter with due professional oversight.

Legal Requirements for starting a Coworking space

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Creating a new co-working space seems like a very easy business to start — a prominent real estate, some contemporary furnishing, an active community and you have a winner, right? Well, pause your thought and step back and think what are the legal requirement one needs to comply with.

The Building

Laws relating to real estate differ for every city, especially those involving zoning of residential and commercial spaces. However, there are few broad pointers one needs to be mindful of before you enter a lease for building your co-working space

– Legal Title: A thorough due diligence of the property may cost you money up front, but it is always good to know that the legal title of the property is free of encumbrance.

– Sanctioned Plan: Is the building in which you are planning your co-working space built as per the plan sanctioned by the Competent Authority. Major violations can lead to sealing of the properties or worse demolition.

– Commercial Property: Is a co-working space a commercial business? Well it would seem so, it’s after all the space from where people will conduct their business, so make sure that the building does not violate any of the zoning norms. Likewise, the charges for utilities vary for residential and commercial connections — pay your dues.

– Licenses: Every building needs certain local clearances like those from the Pollution Control Board, Fire safety etc. Do they have all of them in place? Safety of the residents should be of paramount importance, so make sure that the building is well equipped.

– The Lease: Lease agreements may need to be registered with the local authorities for it to have legal sanction. The stamp duty on these leases typically depend on the length of the lease and the rental. The requirement to register may vary across states, so make sure that you have planned for it.

– Sub Lease / Licensing Agreement: What type of co-working space do you plan to build? Will it involve granting long term sub-leases to your residents or only short-term usage. Your lease agreement, along with a host of other clauses, should clearly spell out that you can carry out business of this nature. Make sure the lessor understands your business so that there are no unpleasant surprises later.

The Business

Every business has certain set of compliance that they need to be aware of and comply with. Ignorance of law is not an excuse!

– Registration: State laws will require you to obtain an Shops and Establishment license for your workspace. Also, if you plan to keep the workspace running beyond the normal work hours, or round the clock, you may need consent from the local authorities. Keep them handy when the inspector comes knocking on the door.

– Employment & Labour Contracts: You may not need many employees to help your run your co-working space, but if you exceed the limit under the respective statute, you may need registration (example PF, ESI etc). Keep in mind that even those working on contractual basis may be counted towards some of these laws.

– Tax Registration: Thankfully now that GST has been rolled out, this is the one tax registration that you need to obtain for your transaction taxes. Yes, in addition to this, you will need your PAN, TAN etc for income tax purposes.

– Licenses: Most co-working spaces provide a power back-up that is powered by Diesel Generators (DG). Make sure you have the necessary permission to operate a DG and to store fuel.

User Agreements

Hmm, you crossed the first couple of hurdles, now for the all-important contract with the users. Think that calls for another blog. And while you do that, head over to Sneed and list your space and be discovered by the people looking for a workspace like yours.

Disclaimer: This is not a comprehensive list of compliance that a workspace must follow and does not constitute legal advice. Different rules may apply based on the nature of the lease and the business model adopted. We recommend you seek special legal counsel for all legal compliance.