‘Should you charge your coworking members?’ has no clear yes or no answer. The clear thing is that it depends. The COVID-19 outbreak is sweeping through the world and is putting an enormous burden on the coworking and flexible workspace industry. In fact, most of the commercial real estate industry is in the same position – struggling to collect rent for shut down properties.
There’s a big question in the industry that’s been bothering many operators and members during the last weeks – should members pay for their membership if their coworking space is fully shut down?
There were a number of reports on WeWork and other big providers that keep charging their members, even though their spaces are closed.
There are many reasons for charging or not charging your members, unfortunately. Just to give you an example, at OfficeRnD, we have 3 office memberships in 3 countries. All three gave us a different discount:
As you can see, this is quite interesting – coworking providers have a different opinion on how much their members should pay during the lockdown. There are many reasons why your members should pay or not, so let’s dig in.
In order to understand whether your members should pay, let’s decompose what coworking and flexible workspaces are – rent or a service?
In most cases, the office or the desk the members are renting is offered as a service. That’s why it’s called workspace as a service or flexible workspace. In most cases, the membership contract (or license agreement) is not tenancy and is not considered an ‘interest in’ the land.
This is very important to understand – it means that the flexible workspace operator, being the one who signed the lease and has ‘interest in’ the property (renting it), is the one who is the tenant and should almost always pay their rent.
Of course, in the current situation, as a tenant and an operator, you should try to renegotiate your rent but that’s another topic that has been covered already. On the other hand, a member of a flexible workspace is not a tenant and does not pay rent. It pays for a service provided by a service provider. Should the member pay for a service that is not available though?
Since we clarified that, now the question of whether the members should pay comes down to a term that is very popular in the SaaS (Software as a Service) world know as availability of the service – what does the membership contract say about the availability of the service?
Most coworking and flexible workspace providers won’t have anything specific in their contracts about the availability of the service and the current situation is most likely, not covered. This makes the current case a very hard one.
That being said, it is really up to an open conversation between the operator and the member to agree on terms that will work for both parties. I can’t comment on the legal aspect and I really hope that neither party will end up pursuing legal actions.
For sure, this is outside of the control of the service provider, so the members should be supportive and act very responsibly and respectfully.
Appeal to all members of coworking and flexible workspace – Support your service providers and pay your memberships! They need your help more than ever before!
On the other hand, the operators should also get into the member’s shoes and try to help as much as they can, mostly by giving discounts. For example, imagine that a serious internet virus shuts down all commercial software and you can’t access your coworking management software for months.
Will you pay for the service? Will you cancel? Or will you ask for a discount? What if you’re on a pre-paid yearly contract?
A popular idea that we see some operators are doing is to offer a 50% discount for the locked-down period to office memberships (on yearly license agreements) and at the same extending the length of the contract with the same period. This sounds like a fair deal for both sides.
Hint: You can also ask the members to return the discount favor and help you with a positive review on Google, Facebook or other social media.
It is harder for the month-to-month memberships – in these cases, most operators will pause the membership completely. Our advice is to try negotiating at least 30% (or 50%) payment and keep their membership open. To balance it out, you may offer your members additional Virtual Office services for free.
Although it is an extremely tough situation for the entire industry, we can survive it if we stick together!
Talk to your members. Listen to them. Be very open about your rent, your financial situation and try to find a solution that works for both parties. Keep the communication open and update them frequently for all changes.
If you’re looking for more ideas about the other measures you can take in the current crisis, you can check out the following posts:
Good luck and stay safe!
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