Taking serviced offices? Why you need a lawyer

As businesses deal with an increasingly uncertain climate, they do not want to sign up to the standard five or ten year lease. Instead, we are seeing lots of occupiers exiting their traditional offices and moving into serviced offices.

Benefits of Serviced Offices

It is easy to see why occupiers are moving to serviced offices:

• Flexibility: Generally serviced offices do not tie occupiers into long-term commitments. Occupancy can be short term or if longer can be terminated on a month’s notice.
• All inclusive: Serviced offices typically include a lot of services – photocopying, meeting rooms, broadband. A tenant in a traditional office would have to arrange these itself.
• Ready to work immediately: As they are already fitted out, occupiers can move in and start operating at once – no need to fit out.

So why do occupiers need to use a lawyer when signing up to serviced offices?

Serviced office agreements are complex and the rent is typically much higher than the rent for an ordinary lease of similar premises. We often find occupiers do not understand what they are signing up to. We also find that the agreements can be deliberately misleading.

Here are our top tips when taking serviced offices

1. Do not be seduced by ‘Standard Terms’: Occupiers are told by the providers that the terms cannot be amended.  They are wrong, they can, and it is not acceptable to an occupier should be.
2. Beware of ‘Small Print’: We often see serviced office agreements where the terms are in extremely small print (so small as to be almost illegible). But you are still bound by their provisions regardless of whether you read them.
3. Do not believe the terms are ‘Fair’: Occupiers are generally told by the provider that the terms are ‘fair’ and there is no need to check them. Do not believe them.

We see regular ‘unfair’ provisions in serviced office agreements which cause major unexpected costs for occupiers for example:

• Your office can be moved. Most agreements allow the provider to move you to another office in the building even if it is worse and you do not want to go.
• Your building can be closed. Serviced office providers with multiple buildings often house the right to close your building and move you to offices in another building – again, regardless of your wishes and regardless of whether the new building is appropriate or of similar quality.
• Your serviced office agreement might automatically renew. We see this a lot where agreements automatically renew for a further substantial term unless the occupier has given notice to the provider that it is leaving.  And such notice must be given well before the end of the term.
• The serviced office might be subject to restrictive covenants. You will not know about them unless your lawyer checks!
• The serviced office might be subject to planning restrictions. Again you will not know unless your lawyer checks.

The most important piece of advice when taking serviced offices is to use a lawyer

It is crucial that you have an experienced professional acting for you who has knowledge of serviced office agreements and can make sure you do not fall into the many traps.

Please call Michelmores to advise you further when you are entering into a serviced office agreement.

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Matthew White

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