3 Types of office rental contracts – choosing the right one for you
Note: Please consult an attorney before drafting any legal document, the examples below are merely example’s to be used for guidance purposes.
Recently, we’ve been talking about some of the lighter aspects of coworking; individuals who work there, the benefits of working at these spaces, and U.S data on coworking. However, we’re more than just coworking spaces, and as such today we’re dispelling some of the mystery around long term rentals.
When renting out a space for the first time, most individuals are familiar with the fact that they need a binding contract between the parties to protect themselves in case of damages. On top of this, most people realize these documents are often much too unwieldy and complicated for them to create on their own. As such, many individuals turn to outside resources in order to outsource the work that needs to be done.
So, you’ve gotten to the point where you know you need a contract, but which one is right for you? Luckily, we here at ShareYourOffice are well versed in all the intricacies that come with choosing the proper agreement.
First off, if you’re the owner or tenant of a space and you’re looking to lease (or sublease) a space to an individual, what contract is right for you? There are a few things to consider.
- Are you renting the space from the owner?
- Are you renting the space from someone other than the owner?
- Are you looking for flexible contracts that work month to month?
If any of these apply to you, there are three contract options:
- The Lease
- The Sublease
- The Membership agreement
So, if you own your own space and you’re looking to rent it out; you most likely would like -
Pros: The Lease is your standard go to agreement between two parties. These tend to be the most legally binding, but also the hardest to work with. A lease is ideal when you are the owner of a space looking to rent out a specified portion for a concrete amount of time. Having a lease will help protect you from potential damages, along with giving you predictability.
Cons: Leases are incredibly inflexible, and are not ideal for individuals looking for month-to-month programs. As such many small startups may be turned off by the idea of being locked into a 6 months to year long contract. Likewise, in many states both parties must give up to, but sometimes more than, a months notice prior to cancellation of the lease.
*Note: If you are not the owner of a property, ie you are a tenant, you cannot lease that property out, unless you have a written consent by the owner. As such, only the controlling owner of the space in question is allowed to lease his or her property.
That option doesn’t apply to you? So you rent an office building but have an extra room, along with express written permission by the owner that you can rent out extra space you may have? If so you’re looking for -
Pros: The Sublease is a great tool for individuals who are renting out a location with extra space, and are looking to regain some of the losses incurred by their unused space. The sublease allows a renter to rent out a portion of the space they’re allotted to another individual. Generally subleases are for shorter durations, are less formal and binding than a traditional lease. However, they are still legal agreements, and in numerous states share just as many protections for tenants and owners as leases do.
Cons: The sublease is somewhat less stable than a contractual lease. While they are shorter in duration (Which can be a good thing) the ability to renew the contract at the end of a term is unlikely, and the sublessee is bound by the leaser’s actions. Likewise, as a sublessee it is not uncommon to be duped by a tenant claiming to have the authority to sublet out an area, when in reality they do not. This can lead to financial losses and personal hardship in a worst case scenario. Always ask to see the original lease before signing a sublease.
So, neither of these are for you, you’re an individual who just needs a little bit of space on a flexible term. You then are looking for:
Pros: The Membership is a much less formal, short term agreement between two parties. Memberships are often made on a month to month basis, highlighting an agreement between the individuals for access over a small space. This is ideal for freelancers, small businesses, or any other person who wants to operate out of a location on a flexible schedule.
Cons: One of the biggest pitfalls of the membership agreement is the limited protections it provides to the renter. Under most contracts, the controlling party can make any changes they want to their space and costs on a month to month basis, providing little stability in this area – though behavior like this is rare. Likewise when your team begins to expand, you may find it is no longer cost effective to have a dozen memberships at a location vs a small office of your own.
This concludes our beginners course in Leases, Subleases, and Memberships – At Share Your Office we pride ourselves on our knowledge of all things office, and are happy to help any individual with problems you may have renting out a space. Our lease, sublease and membership contracts are available for download and use, though make sure you know whats right for you. Now get out there and start working!