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Airspace leases: property out of thin air

Leasing the airspace above your property is one way to maximise the income available from your investment. You might lease the airspace to a developer who adds floors to your build...

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Date: 22/04/2021

Authors:

Nick wood colour 2017

Nick Wood

Senior Associate

Leasing the airspace above your property is one way to maximise the income available from your investment. You might lease the airspace to a developer who adds floors to your building, or to a tenant who installs telecommunications equipment or solar panels on the roof. Getting good advice early on is essential, as this is a route littered with potential issues at every stage.

Do you own the air?

A property owner will only own the airspace to such height as is necessary for the ordinary use and enjoyment of their land. This ownership is meaningful in that it can be trespassed by trees, cranes or projectiles, but it is unlikely to be trespassed by an aeroplane.

If you own a freehold estate you likely own the air immediately above it. However, ownership becomes less clear where this freehold estate is subject to leases or where the estate you own is leasehold.

Seeking legal advice will help you understand who owns the “occupational” interest in the airspace:

  • If it’s for a ground floor flat in a multi-storey building then that leasehold estate is unlikely to own the airspace.

  • If airspace is reserved to the landlord in the rights reserved then again it is unlikely that the tenant will own the airspace.

  • If it is a lease of whole or a long lease of a top floor flat then it is likely that the airspace will be demised.

You own the air, but can you lease it to the tenant?

Even where you do own the airspace, there are further issues to consider.

Where the tenants of the building are residential, they may have a statutory right of first refusal in connection with any disposal under the Landlord and Tenant Act 1987. Failing to make an offer to residential tenants under this statutory right of first refusal can have serious consequences, including criminal liability.

In all cases the title should be checked to ensure that there are no registered third party interests that would prevent an airspace lease being granted to the investor’s desired tenant; restrictions against disposal would need to be complied with to enable the airspace lease to be registered at HM Land Registry.

If the existing leases at the property have nuisance clauses or grant rights that would prevent development, these would need to be accommodated or the development would be at risk of being injuncted.

You can lease the air to your tenant, but is it viable?

When it has been determined that the investor owns the air and can lease it to their desired developer tenant, there are still questions to be considered, including:

  • infringing rights to light of neighbouring property

  • party wall issues

  • the structural viability of the building

  • procuring planning permission

Your lease is viable, what next?

Once you’ve done your homework and established the viability of granting an airspace lease to your developer tenant, unfortunately the next step is not any easier!

Since traditional leases relate to physical structures, many of their features struggle to match the demands of the drafting required for an airspace lease. Defining the demise, establishing rights of entry for the landlord and drafting alterations clauses, for example, all prove difficult. Bespoke provisions and plans will need to be prepared. Other considerations will include the relationship between the service charge of the existing leases and the service charge payable under the airspace lease.

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