London is already renowned for its world class prime and super-prime residential property market. The market offers properties fitted with high specification appliances, advanced technology and remarkable interior decor in the most sought-after postcodes of central London. So, one wonders, how could you trump this?
Feasibly by adding the very best amenities and services from your favourite luxury hotel and fitting it out with a designer brand style you most associate with. This is the essence of the branded residence - it offers the best of all worlds and it’s not hard to see why there is a growing market for them in central London but also globally.
The concept describes residences which are affiliated with a brand, whether by service or design (though often a combination of both). Initially the branded residence was a natural extension of the high-end hotel brands – who are no strangers to long term high net worth guests living in their apartments and suites (Coco Chanel spent 34 years at the Ritz Paris). However, more recently other luxury lifestyle brands (including fashion, music and cars) are starting to enter the space.
Even before the pandemic, but increasingly so after, flexibility and mobility are a priority for the global elite, and the branded residence lends itself to convenient frictionless living. Buyers regularly want to purchase a property already fully furnished (often the show home) so that on day one they can walk in, unpack their suitcase and be ‘home’. Buying the contents, as well as the show home itself, gives buyers an opportunity to be brand loyal with their house or apartment as well as their possessions. The branded residence also offers a buyer peace of mind knowing they can ‘lock up and leave’ and that their property will be maintained and cared for by a tried and tested luxury brand.
From a legal perspective, the branded residence is more complex than a traditional purchase. In addition to the standard due diligence, the property is likely to be a new build necessitating the review of the construction contracts and warranties. The properties have best in class technology which can require careful snagging assessments as well as a suite of documents relating to the brand’s management and any potential lease back options that might be available to a buyer if the brand is a hotel. All these elements must be carefully reviewed and reported on by the buyer’s legal team. For some buyers, the downside to these offerings are the significant service charge levels which come hand in hand with the suite of services and the complex M&E contractual arrangements which underpin the functionality of branded residences.
There is an additional legal tension that comes from the lacuna between the leasehold term (or freehold) and the length of time a brand is committed. For a buyer, knowing that the brand will remain involved for the long term is critical – both for their experience and for maintaining asset value – and was, in part, a driver of the purchase. However, the length of a prime residential lease is often 900+ years, which is naturally too long a period for a brand to guarantee its association. From a practical perspective, this makes sense as it is impossible to predict what might happen over 900+ years, for example what will be perceived as luxury amenities in 50 years and what buyers may come to expect as innovation as technology develops. However, some buyers may consider the imbalance in timeframes provides less comfort than they might like, despite the flexibility upside.
Although the branded residence is not in any way a new concept, it does feel as though there has been a recent boom in the prime and super-prime residential real estate market of branded residence offerings. It is not difficult to appreciate their appeal to buyers who seek 24/7 first class amenities, a dependably luxurious level of service and a turnkey living experience. In our view, the legal due diligence process becomes even more important to ensure the buyer thoroughly understands the complete package they are buying into - for it is far more than just bricks and mortar. It does, however, leave us wondering what will become the next ‘cherry on the top’?