Unit Inventory extras – Tips and Traps for Developers
Unit inventory extras are often a welcome add on to purchasers of luxury property, differentiating schemes in a highly competitive market. “Extras” can vary from balconies to parking spaces and require forward thinking from the developer on strategy in advance of the launch of a scheme.
Questions to think about when consulting your legal advisor:
- What price is to be attributed to these interests in the unit inventory?
- Are these legal interests to be demised to a tenant by a long lease and assignable?
- Or is there a preference for the landlord to grant a tenant a personal licence to use a parking space or storage unit?
- In respect of the exclusive use of a balcony or terrace adjoining a unit, is the grant of a right in a lease sufficient for both landlord and tenant or should the interest be demised in the unit lease?
- Who is going to be responsible for the repair and maintenance of these features and who is going to be responsible for associated costs?
- What level of management responsibility does the landlord wish to retain?
- How does your proposal sit with your scheme planning approvals?
What kinds of inventory extras are there?
Parking space provision: often a sparse and valuable resource and a key selling feature. Does the landlord want to divest itself of a capital interest in the parking space potentially introducing constraints on any future redevelopment of the parking area as part of the larger scheme or would the parking accommodation within the scheme better lend itself to a right to park on a first come, first served basis? What services are required and how does the legal documentation distinguish between those purchasing with or without parking accommodation in the service charge regime? Does the planning approval allow residents to apply for parking permits from the local authority and what are the drafting considerations for ensuring that any planning restrictions are reflected in the marketing and transaction documents?
Storage units: might this space be used more profitably as parking? Similar considerations apply as to storage accommodation as parking provision where these interests might offer more landlord flexibility when offered to tenants under licence but without the capital return in the premium on the grant of a long lease.
Balconies: only the surface would be demised and for the tenant to repair and maintain in a long lease, the structure would remain the responsibility of the landlord to repair and maintain. Consider specific lease drafting to guard against leaks or flooding from balconies into other units, the use of balconies for BBQs and other fire safety concerns and to regulate balcony furnishings in the interests of good estate management. Are there any scheme specific reasons why a landlord would not want to demise a balcony and would want the balcony to remain within the building service charge regime?
Terraces: as with a balcony, only the surface of a terrace would be demised to the tenant in a long lease and similar considerations apply to the legal treatment of terraces as to balconies. Are these areas included within the agreed floorspace measurement in “off-plan” sale contracts (and how are they treated in achieving tolerances)?
| Tip |
|---|
| 1. Consider as part of the sales pack assembly the legal treatment of ancillary interests or features such as any parking spaces or storage units in the scheme or balconies or terraces adjoining units. |
| Traps |
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| 1. Don’t neglect to address what may seem like lesser concerns when initiating a development project by failing to determine the treatment of ancillary interests at the outset. |
| 2. Do ensure that planning requirements are satisfied. |
| 3. Don’t neglect to address any potential funder requirements or potential future funder requirements on financing or refinancing the scheme. |
| 4. Do keep accurate records updated as to what is agreed and ensure that all transaction documents are consistent. |
