Branded Residences: A Brand Perspective
Real Estate & Construction and Hotels & Leisure
Rasha Al ArdahPartner,Intellectual Property
With the global and MENA region markets witnessing a surge in branded residences, an increasing number of brands, especially luxury ones from fashion, jewellery, automobiles, and beyond, are venturing into this domain. Previously, such endeavours were primarily limited to brands in the hospitality sector. Recognizing the potential for expansion and leveraging their brand power to generate new revenue streams, well-known brands have seized upon this opportunity. In recent years, several luxury brands such as Bvlgari, Bugatti, Mercedes, Cavalli, and Elie Saab, among others, have entered this market.
In the landscape of branded residences, as highlighted in ‘An Overview of Branded Residences in the Middle East’ various types exist, each with distinct levels of brand owner involvement in development and management. Consequently, brand value emerges as the focal point of such transactions. As such brand owners must always enter into such transactions with cautious to maintain its brand value. In this article we will highlight the main considerations for brand owners in branded residences transactions to maintain its brand value and avoid risk associated.
As luxury brands expands from luxury products or services into branded residencies, it is essential to ensure that their trademarks are registered within the relevant classes that are related to real estate before entering into a branded residences arrangement. While the brand can be well-known and can be afforded some level of protection under the law, even if not registered, the registration of the trademark will ensure full protection of the trademark, allow the brand owner to legally license its trademark to others, and ensure that no third party will register the brand for such services.
A brand owner must meticulously select the developer and scrutinize project details, including location. This involves thorough due diligence on the developer's credentials, experience, financial standing, and reputation. Additionally, consideration should be given to the project's location and type.
Trademark licensing forms the core of branded residences transactions, granting developers permission to use the brand for sales and marketing. A license agreement shall be carefully drafted. It generally includes limited licenses to the developer to use the brand on marketing material and advertising. Key clauses in a license agreement are; (i) exclusivity; whether the developer will enjoy exclusivity for a certain area or certain period of time; (ii) the term of the license, for how long the license will be granted, and generally it is for a limited period of time that is linked to the sale of the units or a fixed term; (iii) how the brand will be used; this is a very important aspect of the license agreement, by which the brand owner dictates how the brand will be used in all materials and advertising, how the brand will be represented to prospect purchasers, all the parameters and strict guidelines for the use of the brand are a must to be included within the license agreement, to ensure full compliance by the developer; and (iv) the termination of the license agreement and consequences of termination.
In some types of branded residences arrangements, the brand owner provides designs (interior, exterior design, furniture…etc.) that are inspired by the brand, to give the project the feel and essence of the brand. In such case, proper protection of these designs shall be considered by the brand owner, and clear license should be also covered within the licensing arrangement.
One important aspect that brand owners should ensure is the development and completion of the project as per the standards and time frames agreed. This is crucial to maintain the brand image and reputation. Accordingly, brand owner shall ensure the agreements with the developer include specific and clear standards and timetables and milestones for the project and shall be allowed to have certain supervision within the development phase to ensure such standards are met. Furthermore, the agreements shall include proper warranties to and indemnities to that extent. As such brand owners must have clear brand standards that should be clearly communicated to the developer. Ambiguous brand standards are a source for future disputes. These requirements shall ensure minimizing any reputational damage for the brand and maintaining its value.
Once projects are completed, maintaining residence quality becomes paramount. If the brand owner manages the property (as in the case of the hotel branded residences), risks are minimized. Alternatively, appointing a trusted management company is crucial, with a well-crafted management agreement specifying obligations to maintain brand-related standards related to the brand.
In its role to maintain the standards of the brand, the brand owner should ensure they have vigilant brand control, including their right to inspect the residences to ensure commitment of the management in maintaining the level of standards required, and the right to request any changes to be made, which may reflect negatively on the brand and its reputation.
Branded residences are a flourishing trend, likely to continue growing in the years ahead. While appealing to brand owners, especially newcomers in this sector, these arrangements entail complex legal structures and long-term commitments. Careful consideration and strict adherence to brand protection measures are imperative. Our Intellectual Property lawyers specialize in advising on branded property issues, offering extensive experience in these transactions, and ensuring comprehensive brand protection for our clients.
For further information,please contact Rasha Al Ardah.
Published in June - July 2024
