What to Ask Before Signing a Managed Office Licence Agreement?

Before moving into a managed office, it’s important to understand the licence agreement, especially since it works differently from a traditional lease. For example, while a leased office requires a legally binding lease, a managed office uses a licence agreement. That’s why it’s important to understand how licence agreements work and what to ask before signing one.

This blog post is for entrepreneurs, business owners, and office managers who require a better understanding of licence agreements and what to ask a managed office provider.

Understanding the Terms of Your Managed Office Licence Agreement

Licence Terms and Duration

A licence agreement is provided by the managed or serviced office provider (at Bowman House, we refer to both interchangeably). It stipulates various aspects, including the length of the agreement.

Short-term agreements may cover an initial duration of 1 to 3 months, followed by a short notice period of one month. A long-term agreement may specify a duration of 6 to 24 months. Licence periods rarely exceed two years.

Flexibility vs. Legal Rights

In contrast to a 5-year office lease term, considerably shorter periods under ‘licences to occupy’ offer significant flexibility for businesses uncertain about their future requirements. However, this reduced commitment does not grant a ‘right to exclusive possession’. The latter implies that, unless agreed otherwise, businesses are not permitted to make significant changes to the office or building for branding and other purposes.

Licences terminate upon the sale of the building by the landlord, unlike office leases, which afford tenants additional rights and protections.

Key Considerations Before You Sign

What should you ask before signing a managed office licence agreement? The flexibility of the agreement to either extend or terminate it early is crucial. Extra or hidden costs, including service charges or other expenses beyond the monthly fee, are pertinent questions to address upfront. Avoid any surprises!
Digging into the terms of the licence agreement, down to reviewing each clause, is relevant. A licence fee may be an all-in cost, or other expenses and additional charges fall outside of it. For example, utilities, internet access, and office maintenance, such as regular cleaning, can be extra costs.

Costs and Payments

Initial deposits or advance payments are typically required with a licence agreement. This might be one month or three months, depending on the type of agreement.

Some workspace providers require various one-time setup fees. This relates to phone line connections, internet access, issuance of swipe cards for secure building access, etc.

The monthly licence fee confirms the cost and what is included in the fee. The acceptable payment methods are confirmed, too.

Late payment policies state what penalties the licensee is liable for. The licence agreement should also confirm any long-term consequences for regular payment tardiness.

Office Space and Amenities Offered

The office space, layout, and size must meet your current and future needs. Indeed, it is possible to occupy a second office for overflow or move into a larger, managed office later to accommodate additional employees.

For example, Bowman House offers many serviced offices, including Office 38, a 6-person, 297 sq ft office at Bowman House Business Centre.

An agreement may include business amenities, i.e. kitchen access, reception, lounge areas, boardrooms, training rooms, or meeting rooms. Several spaces are likely communal, whereas others, such as meeting rooms or boardrooms, are often bookable for an additional cost per half-day or day.

IT provision and IT support services are often included as well. Services such as Ethernet or Wi-Fi internet provision to the office, along with related IT support services, are covered under the terms and conditions of the agreement. The internet speed may be mentioned, but outside of a fixed-speed leased line, it is subject to the service quality assurances from the ISP.

Location and Accessibility

Address and Essential Services: the office location is important. Staff must be able to reach it without an overly extended commute. Is the road network nearby good or typically congested? Are there any reliable public transport options? Other useful services include high-street banks, convenience stores, and local supermarket stores.

Accessibility for Clients and Employees: are there enough free parking spaces available? Are there bike racks to secure a bicycle? Are there any electric vehicle (EV) chargers available for people with electric vehicles? Bowman House features an EV charger, as well as ample parking for both cars and bicycles.

Neighbourhood Reputation and Safety: how safe is the area surrounding the business centre? Are security measures in place, like key fobs or swipe card systems, to prevent unauthorised access to the building?

Legal Considerations and Compliance

Who covers insurance responsibilities? Different types of business insurance are available, including employer liability insurance and public liability insurance. Does the licensor cover these under their insurance policy, or must the tenant take out separate insurance policies?

Business rates, special local ordinances, and other regulations may be relevant. The licensor must confirm this to you.

Subletting policies are clarified, too. The ability to sublet part of a rented office is rarely, if ever, an option in a licence agreement. Even with a leased office, subletting is not an automatic right.

Termination Clauses

Notice Periods – as part of the right to terminate, a notice period is required. The agreement confirms the amount of time needed to notify the managed office provider before moving out. The requirements for terminating the agreement must be specified.

Early Termination – it is possible under certain conditions. Penalties and other financial costs likely apply when ending a licence agreement early.

Office Condition and Restoration – the office condition and its restoration to its original state are required, per the licence. If the tenant fails to complete these, the cost of restoration work gets added to the final invoice.

Renewal Options and Conditions

The right to use and the opportunity to renew a licence agreement depend on how renegotiable the agreement document is. Some renewals may include rental increases, such as yearly uplifts for inflation, based on the official UK CPI or RPI rates.

To support local businesses, the managed office provider often gives access priority to existing tenants. This includes office expansion and assignment of additional amenities.

Expectations should be set regarding renewal timelines, administrative processing, and how such information is communicated to the licensee.

Additional Services and Hidden Costs

Additional services, including mail handling, printing, and access to certain office equipment, are detailed in the agreement.
Hidden costs are found within some licences in vague terms and unusual references. Clarify these to avoid unexpected expenditures. Bowman House does not have hidden expenses in its agreements.

Service charges, including management fees, business rates, levies, and other miscellaneous costs, are relevant concerns. These often relate to the specific location or services used.

How does the Bowman House managed office licence agreement stack up? We believe we offer highly favourable licence rental terms for our clients. Whether you’re looking for serviced offices in Royal Wootton Bassett or serviced offices in Swindon, we’re confident Bowman House can meet your needs. Contact us to discuss your office requirements and to book a tour of our business centre.