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IWG Gets a Taste of its Own Medicine

30th October 2020

Though they are technically a tenant, IWG (International Workplace Group) could be viewed as a pseudo-landlord, through their provision of flexible office locations for other tenants to use.

Essentially, for each of the Regus, Spaces and HQ flexible office locations leased by IWG, a special-purpose vehicle is created. This means that the parent company cannot be pursued if the special-purpose vehicle fails to pay rent if, for example, they were to struggle as a result of the COVID-19 pandemic.

Consequently, a London-based law firm called Aria Grace Law has advised a total of 26 poorly-treated IWG customers to apply a similar strategy. Aria Grace Law has advised the businesses, who are at risk of collapse due to the pandemic, to run down the assets of the company under which their contract was signed with IWG and then set up new trading companies to allow their business to continue to operate. The original companies will then have no assets or cash to pay IWG, so even if they were sued for rent, they would not be able to recover it.

This issue has arisen despite IWG themselves demanding aggressive concessions whilst utilising the job retention scheme to help cope with the pandemic. Despite this, its tenants faced financial ruin by having to pay for an office environment that they were unable to use or no longer required. Any aid provided to tenants generally came in the form of offering reduced rent now in exchange for longer, or more expensive, commitments in the future.

We have recently helped a group of London-based tenants who had been taken advantage of by their flexible space operator, through a frustrating process comparable to the one mentioned above. However, we would strongly recommend getting legal guidance before committing to any sort of aggressive strategy for the future.

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