Sharing premises with another business you get on with

Aug 29
3 min read

Updated: 5 days ago

Introduction

Two businesses take a unit together. It is more space than either needs alone, the cost is split, and the arrangement is agreed in a conversation between two owners who get on well.

Two years later one of them is growing and needs more space, or has taken on staff who use more of the shared area, or wants to leave. Nothing was written down: not who occupies what, not how the costs split, not what notice either has to give. The lease, meanwhile, is in one party's name, and they carry all the risk. The other party has the benefit of the arrangement and none of the liability.

1. Sharing premises with another business needs the arrangement documented

Even between friends.

Who occupies what, how costs are split, what notice applies and what happens if one party leaves. This costs an afternoon and prevents the situation where a commercial arrangement rests entirely on goodwill. Goodwill is reliable right up to the point where the two businesses want different things.

2. Establish who holds the lease and what that means

The imbalance at the centre of it.

If the lease is in one name, that party is liable to the landlord for the whole rent and for dilapidations, regardless of what the other business does. The sharing party has occupancy and no security.

3. Check whether the lease permits sharing at all

Frequently it does not.

Many leases prohibit sharing occupation or parting with possession without consent. Doing it anyway is a breach that can have serious consequences, and landlords do notice. Unauthorised sharing is a breach that can jeopardise the lease itself.

4. Decide the arrangement type deliberately

They are not the same in law.

A sublease, a licence to occupy, or a genuine sharing arrangement each have different implications for security, liability and the landlord's position. Take advice on which fits, because the labels carry real consequences.

5. Agree how costs are actually split

More items than expected.

Rent, rates, utilities, insurance, cleaning, internet, waste and maintenance. A split based on floor area is simple; a split based on usage is fairer for some items and needs stating.

6. Set out the practical arrangements

The daily friction points.

Access hours, use of shared areas, meeting rooms, parking, deliveries, noise and who is responsible for security. These are the things that cause irritation long before any commercial issue arises.

7. Sort out insurance and liability

Two businesses, one building.

Each needs their own cover for their own property and liability, and both need to be clear about who is responsible if a visitor is injured or damage occurs. The landlord's insurer should generally be told.

8. Agree an exit for both sides

The part that matters most.

Notice periods, what happens if the lease-holder wants to leave, and what happens if the sharing business grows out of the space. A one-sided arrangement leaves the sharer with no notice at all.

9. Think about how it looks to customers

Occasionally a real issue.

Two businesses at one address, shared reception, and confusion over deliveries and post. Where both serve similar customers this can be awkward, and it is worth considering before committing.

Consider whether your businesses are genuinely compatible day to day. Quiet professional work alongside a workshop, or different working hours, or one business receiving frequent visitors, can make a financially sensible arrangement difficult to live with within a few months.

Conclusion

Document the arrangement even where the relationship is good, because circumstances change.

Establish who holds the lease and therefore who carries the liability, check whether the lease permits sharing at all, choose deliberately between a sublease, a licence and a sharing arrangement, agree how each cost is split, set out access hours, shared areas and security responsibilities, arrange separate insurance and clarify liability, agree notice periods and exit terms for both parties, consider how it appears to customers, and check that the two operations are genuinely compatible day to day.