The legal issues concerning real estate in sharing economy projects
4 min to read

The legal issues concerning real estate in sharing economy projects

Date
04 April 2016

The project ‘Sharing City’ (in Danish ‘Deleby’) is a partnership between Realdania, the Fund for Green Business Development and the Danish Architecture Centre. The overall aim of the project is to examine how the sharing economy can be used in more advantageous ways to the enjoyment of citizens, companies and municipalities.

The term ‘real estate regulation’ covers a broad spectrum of legal disciplines, including planning, building, rules of deeds, registration and of course rent regulations. In this post, real estate is defined as a building with furniture, equipment or free rooms, which can be used in one way or the other in a sharing economy context.

Real estate in this sense covers examples such as a school’s athletic facility, a restaurant’s industry kitchen or a derelict theatre stage. The sky is the limit as long as there is real estate which is usable or simply interesting in a sharing economy project. Naturally, the legal issues depend on the specific situation.

If a municipality puts an abandoned building’s industry kitchen at the disposal of a group of citizens, the project will be covered by our definition of a sharing project. The question is what legal issues that may arise in this scenario?

For the rules in The Danish Business Lease Act (»The Act«) to apply, it is decisive whether the lessee pays for the use of the real estate. The Act will apply whichever way the rent is paid. It can thus be put down in another way than cash, e.g. by working. If the citizens somehow pay for the use of the abandoned building in our example, the Act therefore may apply.

The Act contains provisions that cannot be deviated from to the disadvantage of the lessee and this may constitute a problem for the implementation of the sharing project. Amongst others, mandatory provisions in the Act are the payment of the rent in proportion to the time and place, lessor’s access to terminate the contract and lessor’s terminations notices. All constitute essential areas in the contractual relationship between lessor and lessee.[1]

Another perspective is what the legal position will look like in case of damages on the building, its furniture or equipment. If a group of citizens have borrowed kitchen tools from the municipality, it may be necessary to agree in advance on who will be held liable for accidental damages when using the tools. It is important to stress that third party damages also must be taken into account, e.g. in case of vandalism.

Another dimension deals with the cleaning of the tools after using them in the sharing project. As a rule, is must be the users’, in other words the citizens’, responsibility to ensure that the cleaning is done according to normal standards. Supervising the cleaning process in order to make sure that the used tools are ready for another sharing project will therefore also be on the shoulders of the users. However, if the cleaning is not done properly, a problem may occur. Whose responsibility is it now to clean it properly?

Furthermore, insurance issues may arise and it seems plausible that a special insurance is needed to comply with the unconventional situation between the involved parties.

Finally, the use of basic resources such as water, heating and electricity must also be taken into consideration. All these are a necessity if a sharing project involving cooking is to be a success. A vital question is therefore who will be liable to pay the expenses when using the industry kitchen.

This blog post is written solely to give an insight into some of the legal issues that may arise from exploring sharing projects involving municipalities, companies and citizens. The issues mentioned do not give a complete picture of legal hotspots and is thus not exhaustive. There will be many more aspects to take into account depending on the specific situation.

[1] The Danish Business Lease Act articles 42, 43 (2), 61 (2) and 64.

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Written by
Roger Bickerstaff
Roger Bickerstaff
Roger is a partner at Bird & Bird LLP in London and San Francisco and Honorary Professor in Law at Nottingham University. Bird & Bird LLP is an international law firm specializing in Tech and digital transformation.
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