Negotiating With A "Host" For Shared Legal Office Space | Part 1
Part 1 - Introduction to shared law office space:
Shared legal office space comes in a variety of "flavors", but the most consistent offering is a "license" for space rather than a sublease, simply because it is a much shorter document and might be easier to negotiate because it might not require the Landlord's prior consent. For this discussion, let's assume the discussion concerns a license of space.
When you've found space within your geographic and asking price parameters the first thing you should evaluate is the type of building the office is located in. Question 1: What is the quality of the office building and what features and amenities does the building offer as the "container" of your office space.
- The first question should be: "Do you like the building?"
- Is the lobby attended?
- Do you have 7-24-365 access?
- Is there any security on the weekends?
- Newsstand / Coffee / Food / Gym / Drugstore, etc?
- Is the building proximate to public transportation?
- Are extra conference facilities available to tenants
- Is there appropriate (legal) signage or listing in the lobby for your firm's name?
These are all basic questions that will be easy to answer. You will have to dig a little deeper to get all the information you need about the space, it's occupants, and the actual sublessor. Your first question should elucidate exactly who the sublessor is - and you should make sure that you are speaking with a party that has the authority of the sublessor. If I was looking for space one of my first questions would be: "How many years remain on the main lease for the premises? Does anybody have a future option on the space I am interested in? Clearly you want to make sure that a longer term arrangement will be possible if both sides are willing - because as we all know, moving is a real pain - and we all try to do it as seldom as possible.
Next, I'd want to understand the exact boundaries of the space I am subleasing or licensing - and exactly what other areas within the space are considered "common" areas for shared use. I'd also want to confirm that there are no extra fees for using any of the shared amenities. [Note, sometimes there will be a ceiling on shared conference room hours in any given month - this is to protect against people "camping out" in the conference room and using it as an accessory office. Additionally there are sometimes monthly fees to stock the kitchen with coffee and other consumables. Last, there is usually a fee associated with using the host's copying machine (though very often there are a certain number of black and white copies that are included, gratis, each month.
Now you've got a few environment issues to consider:
- Are the windows operable?
- Is overtime, or supplemental air conditioning available evenings or weekends? If so, is there a cost associated with using the system?
- Does the door to your office lock (if required by your client base).
- Can you use the host's telephone system?
If yes, is phone answering included or available?
- Is there a full time receptionist?
- Is there any extra, part time paralegal help available in the suite?
- Is there use of any attorney (court) services shared by the occupants.
- Is the conference room appropriate for depositions? Client meetings?
- Is high speed internet available? If yes, included or extra?
- Is IT assistance available. If yes, included or extra?
- What are the practice areas of the host and other tenants within the office? Is there sharing of work or client referrals within the group on site?
- Is there any file storage space available external to the offices themselves?
- Are basic office supplies available? Extra or included?
The most convenient type of rental arrangement we have seen is the "all inclusive" rental, where the tenant pays a fixed, consistent monthly fee for the space and all of the amenities as delineated in the agreement between the parties. This tends to work best for the small or solo practitioner, because monthly expenses can easily be forecast in advance. Also, it is our experience that the smaller the tenancy, the more sensitive the subtenant is to unknown expenses that could crop up in the future. Defining the expense exactly will make the subtenant happy and much more comfortable with their environment.
In addition to providing a listing service for individual offices for sublease, we are also Tenant Representative brokers. As such, we get involved in lease and sublease negotiations quite often - and we have one overriding rule that we always try to impress on our clients. We believe that when you are entering into a long term relationship to rent office space - whether on a direct from landlord or sublease from tenant basis, that every time you enter the front door to the space you smile with the cognizance that you've had a very good deal negotiated for you, and you are happy with the space. Because if it is anything otherwise, you're going to have a real hard time on a daily basis. And as small business persons ourselves, we are particularly sensitive to making sure that office space imparts this aspect on ourselves, as well as all of our clients. This is perhaps the best advice we can pass along: "If you're not going to smile every time you enter the space - then let it go and find another! You should never rent a space because you "have to".
That brings up the question of timing - because anyone that "has to" rent a particular space must by definition be at the tail end of a time sensitive bind - with a hard date for move-out rapidly approaching. This is exactly the situation you want to avoid. Ideally your old lease will terminate and your new lease will begin on the same day (or the new lease will begin a short period before the old one terminates).
How much time do you need to find new space? It depends on the current inventory of available offices as well as how picky you are. For the most part the individual offices available for sublease that are listed on the looking for space website are vacant and available on an immediate basis. Only about 10% of the spaces have advance possession dates. Therefor, if you intend on taking advantage of one of the majority of listings on our website, you have to be prepared for (relatively) immediate occupancy. By "relatively immediate" I mean that you have to be in position to move this month, next month, or possibly in some cases in 2 months. In general you won't find a sublessor that is willing to commit to a future occupancy and wait more than a few months with vacant space prior to your occupancy. Of course it would be ideal, in advance, to coordinate your move-in date with the prior subtenant's move-out date...but it is rare that we see a seamless transaction like this unfold.
NEXT: What should you anticipate in your negotiation?