Co-sharing versus commercial leases: The law of shared office spaces

In 2019, temporary and transient continues to prevail over the permanent and fixed in Canada’s work world. From 1998 to 2018, the number of Canadian temporary workers grew to 2.1 million from 1.4 million, according to Statistics Canada.  

As the employee goes, so goes the office space, with shared office spaces on the rise. 

The growth has been supersonic. By 2022, the number of shared office spaces globally will surpass 30,000 — up from around 14,000 in 2017 and just 14 in 2007, according to Small Business Labs. As more businesses move with the trend, the law around shared offices becomes more relevant and businesses need to be aware of the many differences between a co-sharing agreement and a traditional lease, says Melissa Tayar, a real estate and banking lawyer at Dickinson Wright PLLC in Toronto. 

A co-sharing agreement is a licence granting the right to enter and use the space, but it does not confer interest in the real property and co-sharing agreements do not contain the statutory protections commercial tenants have, she says. 

With a lease, there can be strict termination and default provisions, but with a co-sharing licence, the licensor can unilaterally terminate with just 30 days’ notice, Tayar says. 

“If the nature of your business is something where it's going to be a hardship for you to find a new space or move . . . you might want to take that into consideration. This might be a shorter period than you intended,” she says. 

Depending on the business, there are varying needs in the way of utilities, and those entering into a co-sharing agreement should determine what their business needs are because, in these arrangements, generally, utilities are shared by all users of the space and users don’t control things such as building management or communication systems, Tayar says. 

“So, if your business and what you're doing has heightened or [there are] particular needs with respect to electricity, for example, you might elect to negotiate that upfront and have a provision in your licence agreement that will allow for this heightened service, rather than the standard service that is available to all of the users of the space,” she says. 

And just as apartment renters can find themselves evicted for Airbnb-ing their place, so, too, must an office-share company keep its operations in the open — contractually — with its landlord. On the licensor side, a company such as WeWork is a tenant in the building and needs to negotiate a provision to be allowed to offer a desk to a third party, says Tayar. 

“Those provisions require consent,” she says. “If you're in the business of offering office share and you don't want to have to approach the landlord for consent, each time you enter into one of these licence agreements, you should negotiate that upfront to allow that in your lease.” 

Another aspect that needs to be negotiated between landlord and tenant is permitted use. Co-sharers need these provisions as broadly defined as possible so that they can welcome any type of business from any type of industry, Tayar says.  

“If the permitted use in the tenants lease is for general office space, that may work if all of the users in the building are just planning on using it as an office, but the minute that somebody starts using it, for example, as a call centre, that would be offside the lease,” she says. 

Sharing an office — as some small firms and sole practitioners do with larger firms — require extra care in protecting confidentiality, Tayar says. Having client conversations where others can overhear and sharing a printer are a minefield ethically, she says. 

“Traditional office spaces aren't as common as they once were. And even traditional businesses are now moving into that more flexible arrangement. . . . So, I do see this as a growing trend. And I think that is going to continue into the future.”