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Common leasehold factors to look out for in luxury new build properties

When you buy a luxury new build apartment you are not buying an apartment: you are buying a lease.

By LLM Reporters  |  November 26, 2021
luxury apartment building

Words by Hugh Wigzell, senior associate at Farrer & Co LLP

When buying a luxury new build property, you will expect to receive just that; luxury and the absence of concern that comes with it. Complex legal problems are never part of this idyllic picture, and, you’ll be pleased to read, nor are they part of this article. Suffice it to say that negotiating the provisions of a new lease can be a process fraught with legal nuance.

Possibly of most importance are lease provisions which are directly felt by apartment owners day-to-day. Here is a selection of favourites.

Pet licences

Under most leases you cannot keep a pet; it is a frustrating process for those who purchase their dream home only to learn that they cannot live there with a cherished pet. 

It is a challenging provision to negotiate out of a lease, as a developer of luxury apartments is concerned with the building’s ongoing amenity and ensuring their enclave is a sanctuary for owners and occupiers. Nobody wants to live next door to a noisy or aggressive dog. 

pet cat
It is essential that you tell your legal team about a pet to ensure that they obtain consent for it before you contract to buy the place

Fortunately, there is usually express provision for the landlord to grant consent and most landlords do exercise this on request. However, it is also usually revokable at the landlord’s absolute discretion. 

It is essential that you tell your legal team about a pet to ensure that they obtain consent for it before you contract to buy the place. We typically ask for as much information as possible: name, age, breed, photo and description (think ‘Stephen is a well-behaved three-year-old dachshund. When he’s not in the park, he loves sleeping and quietly listening to Classic FM’). It’s like a tinder profile for pets. 

Use clauses

Not only do leases circumscribe your choice of animal companion, they will often circumscribe your human companion too.

Leases contain use clauses, which restrict what you can use your shiny new apartment for. Typically, you can only use the space for residential occupation (which won’t typically restrict working from home, but you need to keep a sharp eye on the wording just in case). Largely, this doesn’t pose too many problems, as most buyers of luxury newly constructed residential apartments purchase them for exactly that purpose.

luxury loft apartment
Leases contain use clauses, which restrict what you can use your shiny new apartment for

But, as ever, the devil is in the detail. A clause that stipulates that the apartment can be used only ‘for residential use in the occupation of one family’ on a strict reading would preclude professional sharers. Often our clients are purchasing an apartment with the intention of allowing a child to occupy while they study in London and often with a friend. For such buyers, it is important that the use provision does not inadvertently restrict this.

Slightly aside are clauses that prohibit immoral use and I recently encountered an anti-corruption provision. Whether the fact that your lease dictates that you cannot do anything immoral or corrupt stops such behaviour is moot, but if you do misbehave the landlord will have recourse.

Sub-letting

Care must also be given to rental provisions. You can sub-let under the terms of a long residential lease but there may be restrictions that need to be adhered to. Landlord’s prior consent may be required (and if so, it is important that the provision stipulates that consent cannot be unreasonably withheld or delayed, and optimally consent will be deemed to have been granted if you make an application to the landlord and do not hear back within seven days). 

Typically, the sub-lease will need to be of a type that does not grant security of tenure to the sub-tenant; and often there will be a provision requiring the sub-lease to contain similar provisions to the main lease and/or requiring the sub-tenant to adhere to provisions of the main lease.

luxury properties
Typically, you can only use the space for residential occupation (which won’t typically restrict working from home, but you need to keep a sharp eye on the wording just in case)

Generally, these provisions are not controversial, but they need to be carefully reviewed in the context of rental investments. Many purchasers of luxury new build apartments have half an eye on renting them and even where the intention is not to sub-let it is important that there is flexibility to do this on reasonable terms. 

We expect most new leases in luxury apartments to expressly prohibit short-term lets, so if you are buying with the intention of listing ‘Sumptuous Elegance in Luxurious London’ on Airbnb, check the small print.

Final thought

When you buy a luxury new build apartment you are not buying an apartment: you are buying a lease. The lease fulfils many functions, defining what you do actually own and what you can and cannot do with the property. Generally, a well-drafted lease has the long-term comfort of the majority of occupants in mind, so prohibitions on pets and immoral use serve a purpose. It is just important to ensure that you do not buy a dream apartment with a lease that prohibits your intentions.

farrer.co.uk