Sharing Office Space For Attorneys
Office space sharing works both for solo practitioners and small to mid size firms. Solo's, more often than not, will rent 1 office and 1 workstation within the premises of a larger law firm. Solo's expect to use the conference room(s), kitchen, and copy/scan/fax as required. Whether or not the telephone system is shared and the guest firm's calls are answered in their name will depend on each individual situation. A small law firm, moving its entire operation, will generally look for 3-6 offices - ideally proximate to each other, with 2-3 workstations nearby. A small firm expects the same services in a shared legal office space - and often requires additional file storage space, external to the offices. A mid size firm seeking shared law office space is a bit of a different animal. Usually, a mid size firm will have at least 3 satellite offices in addition to its main headquarters location - and frequently when there are no conflicts of interest the mid size firm will establish an outpost in another law firm in the right location (and of an appropriate practice type). We see mostly 3-6 offices for this type of situation, but frequently it is just 1 or 2 offices for attorneys visiting town for a specific case or for dedicated attorneys in that city.
A major issue is the implication that all of the attorneys within a shared legal office space are practicing together. If a firm gives a client the belief that the unaffiliated firms are practicing together, then ultimately if there is a problem with a client matter, the different "guest" firms could together be held liable for torts generated by their suite mates. Each firm within a shared suite has to appear independent - so of course all of the stationery will be independently branded - but the phones should also be answered in the firm's name. When the operator answers "Law Offices" - there is an inference that the firms are under one roof, and are together.
Larger law firms will generally not be interested in shared office space and instead will only work with separately demised units of space that have permanent walls to separate them from the other firm. Usually the larger firm sees a security issue with "other" attorneys having offices within their space. It is primarily a matter of client security. In any office sharing arrangement both the "guest" and the "host" firms have to respect each other's requirement for client confidentiality - and this can be a sticky point in shared office space if every practitioner is not on the same page with this issue.
When you are evaluating taking space in someone else's law suite, it is as important for the guest to vet the host as it is for the host to vet the guest. You should first understand if there are any "personal conflicts" from a personality standpoint. You're going to be spending more time in the office than you do at home and if there is a personality issue your days will not be pleasant. Next, you have to evaluate client conflicts and practice conflicts - and when all 3 areas have passed muster you should go out for lunch together and seal the deal! You might be happy to find that your host is also a source of referral business to your practice.
Never, ever take space on a handshake. Things always change and there are always unexpected problems that arise. You should minimally have a memo of understanding but you are much better off if both parties have executed a license agreement or a sublease for the space that clearly spells out:
- A description of the space being rented (ideally located on a floor plan)
- The monthly and annual rental for the space in the first year, and any proposed base rent step ups that will occur in renewal years.
- A list of all other potential landlord charges that are described as included in the rental (electric and utility charges, cleaning charges, rubbish removal charges, real estate tax and other escalation charges.
- There should also be a list of agreed fees for any of the services provided in the suite like: extra conference room use, telephone service, telephone answering, high speed internet, copier costs per page, office supplies, kitchen expense contribution, shared services, shared subscriptions, paralegal or secretarial help if available.
- There should be a clear description of the term of the agreement, the possibility of renewal or extension, and whether or not there is any escape clause or cancellation potential for either or both sides.
- The Host firm will very likely require liability insurance paid for by the Guest, and the amount of coverage should be delineated in the document as well.
- Are the furnishings included? There should be a list of whatever comes with the space in the agreement.
Develop a clear menu of what is included and exactly what the unit cost is for items that are not included in the monthly base rental. Generally, a subtenant or licensee will prefer to pay one all inclusive rental each month.
Generally in New York we see both license agreements and sublease agreements being structured for shared legal office space. In the case of a license agreement it generally does not need the prior consent of the landlord if the Lease permits a specific amount of "desk rentals". A sublease will generally require approval and when you are scheduling a move you have to take into account that the landlord generally has a set amount of time (i.e. 1 month) within which they are obligated to respond to a request to sublease office space. A license can more easily be cancelled, and in a situation where an issue goes to court, the standing of a sublessee is different from that of a licensee. (We are not lawyers, but it is our understanding that in New York, a Guest tenant has more rights in court with a sublease than they would with a license agreement.
Generally renting shared legal office space provides a great benefit to the sublessee (subtenant) because they will generally get a "plug and play" environment where the real estate and IT are managed by the host - and all the guest has to do is be a polite suite mate and pay the rent on time. Sharing office space makes it easier for a small or solo firm, or a mid size or out of town firm establish a legal presence with all the amenities included, that is managed by someone else. This offers a great reduction in stress and operational overhead that generally makes the monthly rent a worthwhile expenditure.