Splitting a commercial space between two businesses can be a cost-effective solution, but it also raises several regulatory and legal issues, particularly concerning zoning and licensing.

These issues can get complicated fast and it helps to keep them separate when analyzing them. Leases are private agreement between you and the landlord. Zoning laws determine how properties in specific geographic zones can be used. A license is official permission by a government or regulatory authority for a business to do a specific activity.

Signing a lease together for shared space does not automatically mean both businesses can operate within that space without adhering to local regulations. Licenses and zoning laws are separate from lease agreements.

A lease grants you the right to use the space, but licenses ensure you comply with state and local laws regarding business operations. Zoning laws ensure that your type of business can operate from that location.

Commercial leases often include clauses that require tenants to comply with all local, state, and federal laws and regulations, which would include local zoning laws and licensing requirements. Often, attorneys refer to this as a "compliance clause."

This means that tenants are responsible for ensuring their business meet all legal requirements. The lease itself usually only grants the right to occupy the space and doesn’t guarantee that the tenant’s specific use of the space complies with zoning or licensing laws.

Review your lease to determine if there is a compliance clause and if you are in violation of it. If you are violating zoning or licensing laws, then you may also be in violation of the lease.

Since your friend is a commercial inspector and is likely well versed in the zoning laws, you should take their advice seriously and resolve the issue to avoid potential legal problems. Zoning laws are complex because even within the same city or county the laws can vary.

As it regards the license, each business typically needs its own specific license to operate legally and the exact requirements depend on the type of license in question (e.g., health permits, business licenses). It’s unclear from your question what specific license is being referred to, but generally, each business needs its own permits and approvals. This means that your freeze-dried candy business partner and your nonalcoholic drink business may each need separate licenses, those licenses may be different, even if they are operating out of the same space.

Given the complexities of zoning and licensing, I would recommend speaking with a real estate attorney. They can provide detailed advice for your specific situation. If you are in violation of local law, there is a good chance you've also violated the compliance lease covenant.

If you would like to schedule a case assessment with one of our real estate attorneys, please contact us. You may also be interested in our other zoning and land use resources.