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.
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.
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.
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.