I'd echo the other comments. A console table with mirror above near the front door for keys, mail, etc. I'd swap the position of the TV and sofa to allow a direct route from the front door through the living room. I'd soften the window with some sort of coverning, move the hat rack (or get rid of it completely and instead place some hooks on the wall near the entry) and put two small chairs near the fireplace to create a cosy corner (possibly with a small rug to delineate the two living spaces). I'd also add a large wooden tray (or bowl) to the glass coffee table to help it tie with the TV stand. Or swap the placement of the glass coffee table with the timber table which is currently near the fireplace.

Congratulations on your new home. I think you have been very sensible to live in it for a year before starting your decorating, it has given you time to consider the lighting and aspect of each room in all seasons as well as time to evaluate how you want to live in your home and exactly what you need. The lounge does look very big and bulky and will definitely dominate the room, so I would keep to the lighter colour. Don't worry about the kids and dirt - as Kookykaren said, leather cleans easily - sharp objects and textas are your bigger worry regardless of what colour you choose. Laying newspaper on the floor to the size of the lounge is another way of checking how it will look as it gives you a better indication of bulk than tape. I would keep your ottoman simple (one with storage is an excellent idea with the children), just a tone on tone fabric or a pattern using the colours in the rug on the floor of the photo of the lounge. I don't think you have room for too large an ottoman but I would have a square one made the same height as the lounge so when just you and DH are watching TV you can push it against the other end of the lounge and both have a chaise. You can then bring some colour with art work or some patterned cushions on the lounges.

Hi Kate, thanks for the hint, I am thinking of using the leather back cushions (from the old couch, they are still in good condition) plus some very large overstuffed ones kept from an even older settee. Any thoughts on covering, I am wondering if lightweight cotton (floor) rugs would work.

It is all very safe and conservative. I would look at introducing some lush indoor plants, some additional lighting and a colourful rug with lots of texture to finish it all off. Having a mixture of table lamps, wall lights and pendants mean that your living space can have so much more ambience than provided by your harsh downlights. Using different lights can give the room different moods. I would consider engaging an interior design professional to help you bring some of your own personality into the room. Less neutral serviced apartment look and more like your own home. Best of luck, Dr Retro of Dr Retro House Calls/Dr Retro Virtual Visits