This article was originally published in Kizzi’s Luxury Properties, part of The Property Investor Group, on 12 May 2022, and can be found here.
The legal aspects of buying a luxury property
The origin of luxury is to mean excess, and as a conveyancer, that is exactly what we need to protect a purchaser against: the excess of unforeseen costs.
The legal aspects with regards to a purchase are the same whether you are buying a property for £250,000 or £25,000,000. However, what does essentially change is the attention to what makes the property worth £25,000,000 (excluding the location) and how the purchase is structured.
When looking to purchase a luxury property, it is essential in the first instance to ensure that the structure in which a buyer is purchasing the property is the most tax efficient way. This can lead to the potential saving of hundreds of thousands of pounds. It is therefore crucial that effective tax advice is obtained, which means working with accountants and colleagues within ones Private Client team.
If we look at leasehold properties, there are potential huge pitfalls that one must ensure are looked at very closely. It is astonishing how many times one comes across an apartment that may have wooden flooring, an alteration to the floor plan or the addition of a roof terrace that, is either not permitted with the terms of the lease or simply in the case of a roof terrace that is not even within the demise of the apartment.
Where in the instance of wooden flooring, we will need to see that what is there is compliant with the terms of the lease, and may also need to ensure that the wooden flooring is permitted, a licence to alter or even a Deed of Derogation. You may wish to see the results of a Sound & Acoustic Testing (Part E Building Regulation Compliance). This will show what has been installed is now better than what was there previously.
When looking at roof terraces, the first port of call with leases and ensuring what is contained within the demise is exactly what is shown on the agents’ brochure. All too often, one comes across a maisonette where the top floor flat has a roof terrace or an apartment that has a terrace). If the area of the terrace has not been included within the demise of the property, then that area is technically not owned by the Seller, but still by the Landlord of the building. This will leave the seller dealing with a lengthy delay, whilst the Seller’s solicitor deals with the requirements (if required) to comply with the Landlord and Tenant Act, and to agree with the Landlord a new lease and lease plan.
One must also never overlook service charges and ensure that a service charge retention is kept. Simply, if the service charge is £50,000 a year, then it is essential that any lingering costs post-completion that are attributable to the previous owner are able to be instantly settled or recovered from the seller. This issue is not only regarding apartments, but also houses within gated communities or parts of a larger estate.
Moving inside and looking at what may be installed in the property (or within the grounds of the property), be it a lightening system, electronic gates, swimming pool, security systems or the latest Gaggenau appliances, the warranties, guarantees and maintenance contracts that go hand in hand with these must be looked at in close detail. These must have the ability to be assigned to the buyer, and where not, the seller must agree with the provider that these can be novated to the buyer.
It really is so important that when buying a luxury property that gives you that feeling of excess that everything works as it should and gives you that feeling of ease and pampering. More so than anything, my thoughts are always that one should do as much as feasibly possible to talk away current and future stresses regarding the property, so that a buyer can enjoy the property going into the future.