Flexible workspace agreements: legal risks for landlords and tenants

Flexible workspace has transformed the commercial property market, offering short-term, adaptable options for businesses that don’t want the commitment of a traditional lease. But while these arrangements provide convenience, they also carry risks. Many so-called licences or short agreements are, in reality, leases in disguise — bringing with them legal rights and obligations that neither party anticipated.

If you’re offering or occupying flexible space, our commercial property solicitors can help you understand the legal implications and ensure your agreement is structured correctly.

What is a flexible workspace agreement?

A flexible workspace agreement typically allows a business to occupy part or all of a property for a short period without the formalities of a long-term lease. Common examples include serviced offices, coworking spaces, and short-term desk hire.

While these agreements are marketed as licences or memberships, they can sometimes meet the legal definition of a lease — particularly if the occupier has exclusive possession, pays rent, and occupies for a set term.

One key feature distinguishing a lease from a license is the proprietary interest it holds. The registered owner of a lease can transfer their ownership to another and have this recorded at HM Land Registry. A license, by contrast, is personal and does not contain any such transferable rights.  A lease also allows exclusive possession, while a license works as a form of permission to occupy a space. This means less control over the property and more restrictions to follow on alterations and how the area may be used.

Key risks for landlords

If a flexible arrangement is later deemed to be a lease, the occupier may gain additional legal rights, including security of tenure under the Landlord and Tenant Act 1954. This can make it difficult or costly to recover possession. Landlords may also face complications with insurance, lending covenants, and planning permissions.

In order to reduce the risk of this happening, landlords could consider ensuring their workspace agreement does not grant exclusive possession but rather allows for a shared benefit between different parties. It is also best to keep to shorter license terms (such as six months at a time) and to draft agreements with clear provisions, negating exclusivity and allowing for minimal notice periods.

Risks for occupiers

For tenants or licensees, the main risk is the lack of security. Most flexible workspace agreements allow the owner to terminate at short notice, often with little recourse. Occupiers may also have limited rights to make alterations or sublet, which can restrict how the space is used.

Tax and regulatory considerations

Both parties should be aware that flexible workspace arrangements can have tax, VAT, and business rates implications. If an agreement is treated as a lease for tax purposes, the occupier could become liable for additional costs that weren’t anticipated at the outset.

Practical steps to protect your position

Whether you’re a landlord or occupier, careful drafting is essential. Clauses should clearly state the nature of the agreement, the rights granted, and termination provisions. It’s also important to ensure the arrangement aligns with any headlease or mortgage conditions affecting the property.

FAQs about flexible workspace arrangements

Below are common questions about flexible workspace agreements and the legal issues they can create.

What is the difference between a lease and a license?

A lease provides exclusive possession of a space over a fixed time to the owner of the proprietary interest. A license, however, allows the occupation of a space without the same security and exclusive possession of title.

Can a flexible workspace license give me lease rights?

No, a flexible workspace license will not grant the same rights as a lease. It provides less security and control over the property being occupied.

How can landlords reduce legal risk when offering flexible space?

To reduce risk, landlords should draft agreements with care to avoid exclusivity clauses and allow several parties to occupy the same space. They should also have short terms and clear termination rights in the agreement.

Contact our commercial property solicitors

Our commercial property solicitors advise landlords, operators, and occupiers on all forms of workspace agreements, from short-term licences to complex serviced office arrangements. We help ensure contracts are compliant, transparent, and aligned with business needs.

James Halpin, head of commercial property, says:

“A flexible workspace agreement requires careful drafting to avoid misunderstandings and the risk of being construed as a lease. Taking the time to prepare the license right can prevent problems down the line.”

With experience across a wide range of commercial leasing models, our team helps clients structure agreements that balance flexibility with legal certainty. Get in touch to speak with our commercial property solicitors.