COWORKING SPACE – THE FUTURE OF WORK

Adv.Aysha Sahla K P, Senior Associate, Alishahz Legal LLP

It is a tedious journey in this new age world of work and office space. Covid -19 has changed everything about the way we work, the way offices function and the methods of problem saving. It has become quite evident that virtual offices and flexible workspaces are the future of work. Virtual communication to interact with clients and colleagues for a sustained amount of time without having to always be  physically present in the office or travelling to attend crucial meetings or to meet up partners, clients and other stakeholders will become an integral part of the future of work. 

There are multiple takers from any given scenario, and this is no different, as  commercial real estate has begun to bring a tremendous change in the real estate sector globally post pandemic. Corporate culture has always thrived, from the very beginning, by adapting to changes in living conditions and the fluctuating standards of living. At present, smart working environments are taking over traditional working environments to improve the work-life balance of workers at all hierarchical levels, especially in suburbs. Working in the suburbs can be more convenient for employees and affordable for employers, thereby, an increase in demand for suburban workspace is expected to skyrocket according to the current real estate projections. 

With the introduction of coworking, a new era of commercial real estate has sprung up in the Western world such as Europe and America, catering to the needs of freelancers, nomadic professionals, entrepreneurs, start-ups and more recently, companies with remote workers or those in need of temporary work spaces. Even in India, coworking is steadily growing and is now in direct conflict with the traditional office space leasing activity, having grown from an approximately 5% share in 2016-17 to about 15% in 2019. Although the pandemic related uncertainty has impacted the growth trajectory in 2020 for commercial office markets, it is still expected to contribute more than 10% of the overall demand in coming years. 

Coworking spaces reduce office size and space management issues including reduced costs while offering greater flexibility to working people. Leasing activity due to the coworking segment is expected to grow and gain greater significance in the post covid world. Recently, a major co-working company, “We Work” has provided office space, measuring approximately 15,700 sq. ft., in Banglore to a leading law firm in India for setting up their operations. Many companies globally have started to sign master leases or otherwise control large amounts of space and then sublease the space to individuals or smaller groups of users. Moreover, companies are now offering their employees membership in co-working spaces near their home location or working location, for hassle free work management. 

As the number of people working in co-working spaces in India is expected to rise by a tremendous margin, it is time for commercial landlords and real estate developers to start rethinking seriously about their current operations on a conventional leasehold model and adapt to the new scale of leasing method inorder to attract corporate tenants. The Indian Government is expected to bring forth substantial measures such as incorporating suitable legislations for regulating lease terms, registration requirements, redefine the relationship between the owners and tenants, and all other grey areas that affect the structure which has plague the coworking space boom which is being preferred by the corporate start-ups in the major cities of our country. 

While the owners or landlords of co-working spaces, and companies or co-working people would without doubt take advantage of these flexible workspaces, they are expected to present unique legal issues. A few basic legal requirements of the coworking sector are the agreements between owners of coworking facilities and members/tenants of the coworking space,  policies of work, mapping out membership types and defining terms, drafting the rental/lease terms, confidentiality, scope for insurance etc. 

In this scenario, where the co-working industry continues to grow and evolve, so will the law related to this area. Coworking agreements should provide a clear understanding that a violation of code of conduct and policies of the co-working space may result in valid legal consequences. While promoting the innovation, it should be kept in mind that coworking spaces should require their users to have their own liability insurance for personal injury and property damage which could be another area that would potentially increase the threat of litigation. 

With a large group of people all working on different, often innovative, and involved in highly confidential topics and areas, are likely to end up in close proximity with one another, owners of the coworking space should be extremely diligent in aiding them in protecting their confidential information. Incorporating a security policy into the user contract is the first step in the way towards protecting owners and users alike, since cyber security risks are expected to rise steeply, in the common network of the co-working space. 

Recently, in the case of M/s Spacelance Office Solutions Pvt. Ltd., a crucial issue before the Kerala Authority for Advance Ruling Goods and Services Tax Department, Kerala, was ‘Can GST registrations allow for multiple companies from the same address, provided they follow all GST rules related to “Principal place of business”? It was held that “separate GST registration may be allowed to multiple companies functioning in a “co-working space”, provided they are engaged in the supply of services alone. Such companies shall upload the rental agreement with the landlord or lessee. If there is any sub-lease, then the rental agreement between lessee and sub lessee should also be uploaded as proof of address of the principal place of business of respective suit or desk number assigned to them. In addition to this, the applicants can upload a copy of “monthly utility bill” in connection with payment towards electricity charges, water charges or other common services availed by the prospective suit or desk number”.

In summary, governance policies and procedures should be established for evaluating, introducing and monitoring the co-working strategy. Even though major legislation regarding co-working workspace may not happen in the wink of an eye, an addition of the term “co-working” in different related sectors of the existing rules or Acts could be more possible in coming years. The Government of India has already introduced legislation in the Parliament that seeks to consolidate a number of labour laws which also encompasses self-employed professionals, freelancers, platform workers etc. Individuals who opt for co-working spaces more often than not, come under the purview of a “gig worker” under Social Security Code, 2020. Accordingly, the unorganised workers which would include the people under co-working spaces gain protection under the law. Proper legal aspects should be taken care of, for the ease of doing business, in accordance with the local law, and in order to prevent potential issues from arising, which may otherwise surface in the daily operations of coworking workspace.

References and suggested readings