Artist Space Guide

Managing

Renting for a Group of Artists

Renting a studio space most often involves leasing a floor or portion of a floor in a commercial or industrial building. Leasing more space than you can use for your own studio means that you might need to rent or “sublet” the remainder of the space. If you are ambitious and don’t want to move into an established studio building, you might consider renting a larger industrial or commercial space. Here are some options for renting space:

Assemble a group of artists before looking for a building and establish a cooperative and sharing agreement for renting the space.
Find a space and get a group together before signing the lease.
Sign the lease on your own and assemble a group afterwards.
Sign the lease and sublet to other artists who would pay more than their share of the pro rata costs. This setup entails subletting for a profit to compensate yourself for the risks you have undertaken (not recommended.)

Options 1 and 2 entail the least risk, but you might not have time to gather a group before signing a lease, as in option 3. In this case, you should evaluate the risks and the feasibility of subletting space to others. Landlords usually try to get at least two signatures on a lease. The last option (4) is NOT recommended because it inevitably leads to resentment, misunderstandings, and a lack of cooperation that might threaten your status as a leaseholder.

Most commercial landlords prefer to lease entire floors rather than subdivide a floor and handle multiple leases. While a floor lease might give you more space than you need or can afford, it also gives you more bargaining power with the landlord.

Floor Co-op Agreements: The importance of written agreements cannot be overemphasized when setting up a floor of artist studios. These agreements can prevent future problems. Without a written agreement, your tenancy could be jeopardized by personality conflicts. Your claim to your space is best protected with a written agreement that defines and makes enforceable what you have discussed with your co-tenants and landlord.

Many artists find co-operatives to be supportive and creative environments to work and develop their art. Setting up a floor co-operative, with several separate studios or one large studio, has been a popular and successful model. Everyone has an equal say and therefore an equal stake in important decisions. A co-operative agreement binds everyone to equal responsibility and liability with the lease.

By forming a co-operative, you can share not only floor space and utilities but also equipment and materials. Co-operative purchasing can make materials less costly and might be the only way to have access to expensive tools such as a kiln or band saw.

Remember that each group’s arrangement will differ depending on the needs of individual artists.

Subdividing Raw Space

Most artists welcome the opportunity to design their studio space and put a great deal of thought into the layout of the floor. Artists strive to subdivide the area to minimize unusable or unrentable space. Consider the following points when planning the buildout:

Fire Egress: Each studio needs unobstructed access to at least two means of egress, except in rare cases.

Fire Protection System: Walls must built so that they do not interfere with sprinkler heads, and all corridors must have sprinkler systems. Consider the locations of existing sprinklers before laying out new walls. Moving or adding sprinkler heads is an involved process. It is worthwhile to lay out the space with someone who knows the regulations governing sprinkler head coverage BEFORE committing to a plan.

See our Fire Safety Tips for more information.

Wall and Door Construction: Depending on the building type and other factors, you might need more or fewer fire-resistant walls and doors in the space you build out. Some buildings are based on code interpretation that allows for wood studs. Others require steel studs. Some walls can be cheap and ordinary whereas others must be fire-rated.

Access: You should have easy access to the freight elevator, which might require you to have wider corridors than you would otherwise want.

Sound Control: Consider using fiberglass or another kind of soundproofing between the studs if necessary.

Odor and Fume Control: Best controlled at the source. If you have subtenants, tell them what is and isn’t allowed. Put smelly or noxious uses near ventilation sources. Look for ways to directly exhaust odors, dust, and fumes.

Storage: Don’t underestimate your need for storage space. Visual artists typically use 15 percent of floorspace for storage; many find that they need even more. Depending on the floor plan, you might consider setting aside part of the common space as storage. Make sure that any storage you build does not interfere with a sprinkler.

Heat Circulation: When you subdivide a space, you need to consider how heat and fresh air will reach all the spaces. A common solution is for walls not to extend to the ceiling, but this solution gives the space a very “communal” feeling.

Flammable Materials Storage: Thinners and other flammable liquids should be kept in metal cabinets specifically designed for this purpose. Artists often share a single cabinet.

Building Permits and Inspections: Barring minor alterations, everything you build will require permits and inspections. The process of obtaining them does not need to be confusing or contentious, though it does involve some expense and requires the landlord’s full knowledge and cooperation. We recommend engaging a knowledgeable architect and/or code consultant to inspect the space and review your plans before you go to the building department.

Plumbing and Electrical: Always ask the landlord before planning any changes to any plumbing or electrical systems.

Market Analysis

No project should start before conducting a market analysis. Although it’s best to have a hired professional conduct this analysis, anyone with common sense and an inquisitive mind can assemble the following information.

Basic Market Information:

Who is your target market?
How large is the area encompassing the people/businesses/major institutions that constitute your market?
How many potential buyers are in your market?
How much do your buyers or renters expect to pay?
What comparable projects are completed or underway?
How does your project compare in price, location, and amenity to similar ones?
What percentage of the total available space does your project represent?
How long should it take to sell or rent the units?

Useful Sources for Market Information:

Real estate brokers who specialize in similar projects
Visits to open houses in similar projects
Completed appraisals for similar projects: appraisals always list comparables, including price, size, location and amenities
Web-accessible demographic information by zip code
Print advertising and classified ads in real estate sections of the paper and in arts magazines
Town planners/economic development directors
Meetings with local arts organizations, individuals, friends, and colleagues to assess interest in new space

Marketing the Project

Most projects require at least some marketing. Below is a list of typical marketing strategies. The list is ordered from basic to more in-depth. How much marking you need to do depends on the size of the project:

Marketing Tips:

Connect with colleagues through phone, email, conversations, etc.
Prepare an accurate written description and rendering for early communication
Post listings on websites
Post free ads in local newspapers, playbills, etc.
Create a brochure to give to buyer prospects
Develop a website describing the project that can be updated easily and frequently
Present your project to local arts groups and civic organizations
Make targeted marketing calls to larger tenants or collaborators, potentially setting up meetings to discuss your project
Have open houses once the project is done
Place signage on your building
Post your space on MLS.com, an online real estate registry
List your space with a real estate agent.

Selling Units or Leasing Space

A group or developer is allowed to sell or lease units with or without a licensed real estate broker.

If you are selling without a licensed agent, consider the following:

You will need to develop a thorough and accurate property description. It will be taken seriously and quoted back to you by the people who buy or lease space from you.
You will need to respond to buyers. A seller, which you will be, provides a service to the buyer. Buyers know this, even when they are joining an artists’ group or the space is being offered below market price.
You will need to work with an attorney to develop purchase agreements, negotiate deposit fees, and close the sale of units. Brokers provide help with these tasks as part of their fee.
You will have to arrange and pay for access to MLS listings (see below.)

If you are selling with a licensed agent, consider the following:

The broker will list, update, and handle inquires for your spaces listed on the MLS, enabling the public to browse listings for free online. Most condominiums, including lofts, are listed on this service.
At the time of sale, you will be required to pay a commission, typically 5 to 6 percent of the selling price, split amongst the agents involved.
You will need to sign a listing agreement that cannot be terminated immediately if you change your mind.
You will need to communicate changes, requirements, and special features through your broker and any cooperating agents who bring buyers to your broker.
If your group is interviewing buyers (and most are) you might have a minor conflict with the broker (who likes to control the sale.)
You will pay for most marketing materials listed above.

Before picking an agent, interview several brokers, noting their expertise in relation to your project. Brokers can be important members of your team, keeping you focused on your public face, relieving you of nuisance tasks, and running open houses. They render all these services for a fee that you pay at the time of closing.

Who Is Responsible for What?

No matter how the building is legally organized, someone needs to collect funds, pay bills, and keep the building insured and maintained. Most lenders will require a management plan as a condition of approval.

Smaller projects are often self-managed, but larger ones usually hire a professional management company. If you have to hire a management company, interview a few different companies and check their references thoroughly. Make sure that your contract includes a cancellation clause.

The legal documents of an artists’ building lay out management responsibility. Listed below is the terms used for each type of space:

Condominium: trustees
Coop: directors
Rental building: general partner

Management Responsibilities: These responsibilities are organized to follow a routine. When complicated issues arise, a management company will come back to the owners for final decisions. The general responsibilities of management companies include:

Rent, dues, and mortgage collection
Tenant/occupant relations
Personnel management (cleaners, repairmen, etc.)
Maintenance
Common area cleaning
Move-in coordination
Security
Property insurance; a management company usually gets better rates
Long-term replacement schedules
Bill payment
Record-keeping (taxes, annual financial statements, monthly reports)

Owner Responsibilities: These important decisions are numerous. They include:

How much to set aside for replacement reserves
Whether to reroof, repaint, replace the boilers, etc. in a given year
What level of insurance to carry
Gallery or special facility management
Whether to contest tax increases
Disciplining occupants for infractions

Every organization should have a building committee to make decisions about these items, which the formal structure can then discuss and approve. Full-forum meetings of all tenants can be counterproductive; small groups often make decisions more efficiently.

Who Pays What?

Replacement Reserves

We always recommend to begin capitalizing (amassing) “replacement reserves” immediately. New residential properties often start out with a low monthly replacement reserve contribution, about $50/month/unit. This amount is typically too low, eventually resulting in the dreaded “special assessment” which always incenses (or impoverishes) at least a few residents. Reserves should be at least $100 per month per unit or more if your property needs frequent upkeep (e.g. painting) or is only partially renovated.

Paying the Rent

One key aspect of a shared space is the process of paying and collecting rent. Rent computations and payments can result in confusion which can create lease-threatening problems. Here are a few simple approaches:

Establish a cooperative bank account separate from any one individual’s bank account. Each co-op member should pay one month’s security deposit and thereafter deposit monthly rent payments well in advance of the due date to allow checks to clear.
Rotate bookkeeping responsibilities to help all members understand the importance of finances and paying rent on time. Doing so may also deter unfair practices among floormates. The books should be accessible all to keep clear of the status of the finances and avoid surprises.
Devise a clear and equitable rent formula. In many cases, rent is pro-rated based on the actual square footage of studio space. For example, if the total usable amount of studio space on a floor is 10,000 s.f. and you occupy a 1,000 s.f. studio, then you should pay 1/10^th of the rent.
Also consider having a different formula for common improvements or repairs. For example, if the group decided to build a new, common bathroom, should a single artist who has a 2,000 s.f. studio pay twice as much as two artists who share a 1,000 s.f. studio pay? Probably not.

Paying for Utilities

Artists who live and/or work in industrial or commercial buildings are required to pay business rates for electricity and telephone service. These rates higher than residential rates.

Utility payments can be handled through floor cooperative accounts or paid directly to the tenant if the utilities are in one tenant’s name. Some groups divide costs equally whereas others prefer to get exact prices per appliance from the utility company.

In either case, equipment like power tools, kilns, etc. that use a great deal of power might warrant a separate meter. The landlord might agree to pay for one.

Paying for Trash Removal

Most cities and towns do not pick up trash from commercial buildings. In some cases, landlords are not responsible for trash removal either. It is helpful to coordinate trash removal with floormates and, ideally, other businesses in the building. Compare prices from several trash disposal companies. Look into the cost of renting a dumpster and make sure it can be locked.

Setting a Fixture Fee Formula

Establish a clear policy for determining “fixture fees” to be obtained by floormates when studios change hands. The value of fixtures varies from studio to studio, depending on the work done, appliances, and whether sweat equity or contract labor was involved. These figures should be the basis for setting the fixture fees.

Determining the fixtures fees might be complicated. Consider the following:

Number of months left on the lease and the likelihood of renewal
Cost of materials and labor
An inflation factor for materials since the work was done
A depreciation* factor (meaning that the initial owner of the improvement and subsequent users of that improvement have benefitted from the improvement over time. The improvement should therefore be valued at less than the original cost.)

*Calculating depreciation:

Determine the life expectancy for the fixture or improvement.
Establish the cost of the fixture or improvement.
Divide the cost of the fixture by the life expectancy and arrive at the amount of annual depreciation.

(E.g., fixture/improvement: new walls; life expectancy: 20 years; cost of new walls: $10,000. Annual depreciation equals $500 per year)

Subletting

Subletting studio space involves renting or subletting a studio from the artist whose name appears on the lease. Floor cooperative agreements can give sub-tenants broader rights than subtenants without such agreements have. Such arrangements are also easier to maintain in the event of tenant turnover during the lease term, as replacement tenants will know more precisely the mutual responsibilities and expectations among co-op members. Because co-ops are more stable, tenant turnover is less frequent.

Key Fees or Fixture Fees

When you take over an existing studio, the current tenant might ask you to pay a fixture or key fee, ranging anywhere from a couple hundred to a thousand dollars. These fees are for costs incurred in the development of the space. Ask about what improvements you are being asked to pay for and ask to see receipts including hours of work put in. Don’t hesitate to ask how the fee was determined. These fees are often negotiable.

Reviewing Subletting Leases

See how much time remains on the lease you are taking over. Find out when it might be renewed and assess the likelihood of that happening. If there isn’t much time left, consider the risk of losing your fee. Also consider negotiating a fixture fee refund in the event that the lease is terminated or not renegotiated on the agreed terms. Be sure you understand the process for paying rent and security deposits. Subtenants should have a written agreement, whether in a floor co-op agreement or not. Review it carefully with your potential floormates.

Real Estate Taxes

Real Estate taxes can be as much as three times higher for commercial properties than they are for residential properties. Because artist live/work space is difficult to categorize as either distinctly residential or commercial, it occupies an important middle ground. The classification of such space has important consequences for both developers and artists. Wanting to encourage the development of artist space, in 1988 the City of Boston changed assessing requirements to allow commercial building owners who establish their property as legal visual artist live/work space to change their assessing classification from commercial to residential. This revised process saves the building owner significantly on property taxes.

In other municipalities, the residential use usually prevails in choosing the tax assessment category for a live/work project. But this question does arise in public forums, particularly zoning or planning board meetings. If you attend one of these meetings, have your answer and rationale laid out in advance.

Property management brings the group together but through often tedious meetings. High-functioning groups have potlucks or holiday parties to which everyone is invited and where the main topic of conversation is “who cooked that amazing pasta?” and not the insurance bill or the water heaters. Parties boost goodwill and morale.