Licence vs Lease: what is better for your serviced office space?
Finding the right office that meets your day to day requirements can be an exhausting process. There are so many different choices to make depending on the size of your company. Do you opt for a coworking space in a bubbly environment with beer and food available throughout the day? Or a private office in a professional business centre with access to communal facilities? Or a grown-up office with a long term lease where you can brand the space to make it your own? We thought it would be a good idea to look at the difference between a Licence and a Lease, looking at the pros and cons of each.
A Licence agreement allows you to rent/let an office in a serviced office, co-working space or shared office renting individual desks. Generally, Licences are between three months and a year.
- With a Licence agreement, you will have the flexibility to occupy the space quickly, giving you the option to upscale to a larger space, or downsize to a smaller space as and when you need to
- All costs are fully inclusive and include a workstation, internet connection and phone line
- You will be charged on a monthly licence fee enabling you to keep on top of your budget
- You will be able to move in almost immediately after signing the contract, subject to paying a deposit (generally 1-2 months of the monthly licence fee)
- The landlord has the right to give you notice
- You cannot make any changes to your work space
- The landlord has the right to move you to an alternative office of similar size within two miles of the current location
With a Lease term, all rent is payable quarterly and you will have exclusive occupation for up to 10 years. The only way a Lease can be terminated is when the Lease expires, although the landlord can put in a break clause, usually from 6, 12 or 18 months. A Lease agreement consists of approximately 20 pages and you will be required to hire a solicitor to verify and look over the documents.
- Gives you the option of negotiating your preferred agreed terms for the space
- If the term of the lease is longer, you will get a discount on the headline rent
- You may be able to get written permission from the landlord to sublet part of the space to another company
- The space can be branded to suit your company
- Contracts are generally longer, normally a minimum of 12 months
- Initial costs such as fit out of the space, provision of furniture, telecoms and broadband can be expensive
- Dilapidations need to be accounted for which could increase exit costs
Whether you opt for a Licence or a Lease depends on the amount of space you need, your timeframes and budget. If you would like to save time and money by taking advantage of Future Squared free brokerage service, contact us to let us know your requirements.