Pros and Cons of Shared Space Agreements

Posted on 09-12-2018

By: Daniel A. Suckerman and Stacey C. Tyler, Lowenstein Sandler LLP

With co-working spaces such as WeWork growing in popularity, real estate attorneys are frequently called upon to help clients navigate the pitfalls of shared space agreements. This article discusses shared space agreements generally, how these agreements differ from leases, advantages and disadvantages of these agreements from the user’s perspective, and considerations for counsel to both the user and the tenant/licensor.

What Does a Shared Space Arrangement Look Like?

Typically, a shared space arrangement takes the form of a large space within an office building that is broken down into cubicles, conference rooms, offices, and ancillary spaces (such as a cafeteria or a message center) that are shared by multiple users from different organizations. Users are allotted a certain amount of work space within the larger shared space, but the space is typically not separately demised (i.e., there are no walls or locking doors separating one user’s space from another’s). The space is usually fully furnished and operational, so all a user needs to do to start working in the space is sit down and plug in his or her laptop.

Differences between a Lease and a License

Lease Defined

Contracts governing shared space arrangements typically take the form of a license agreement (if not in name, then at least in substance), which is legally distinct from a lease. A lease is governed by real property and landlord/tenant law and is generally a more legally stringent and involved document. Pursuant to a lease, the tenant is given a real property interest in the premises for the term set forth in the lease agreement and receives the benefit of landlord/tenant law in the jurisdiction where the property is located. Generally, the landlord under a lease can evict a tenant prior to the expiration of the lease term only in compliance with the default and remedies provisions of the lease or pursuant to an eviction proceeding, which can be a lengthy process. Finally, since a lease is typically a large commitment and investment, landlords often impose stringent underwriting requirements on tenants and require substantial security deposits, guaranties, and insurance coverage to protect themselves.

 

To read the full practice note in Lexis Practice Advisor, follow this link.

 


Daniel A. Suckerman is a resident in Lowenstein Sandler LLP’s New York City and Roseland, New Jersey offices. He represents a broad range of clients in commercial real estate transactions, including acquisitions, leasing, financing, negotiation of joint venture agreements, and matters relating to asset management. Daniel’s practice is national in scope and crosses all asset classes, keeping him on top of commercial real estate trends. Stacey C. Tyler is an associate at Lowenstein Sandler LLP. She handles a broad array of real estate transactions, including acquisitions, dispositions, development, leasing, financing, hospitality deals, and publicprivate partnerships. Stacey served as an Intern to the Honorable Carolyn E. Demarest of the Kings County Supreme Court, Commercial Division.


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