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Three reasons to remember 1 October 2015 1 October 2015

Here are three reasons to remember today, 1 October 2015:

1.  Consumer Protection

The Consumer Rights Act 2015 comes into force today, replacing the Sale of Goods Act, the Unfair Terms in Consumer Contracts Regulations and the Supply of Goods and Services Act (the Which? website contains some useful commentary on the new provisions).  This is a significant change that gives consumers new rights, although it inevitably creates more complexity.

By way of example, have a look at Schedule 2 to the Consumer Rights Act 2015 (Commencement No. 3, Transitional Provisions, Savings and Consequential Amendments) Order 2015.  In 134 terse paragraphs, it sets out “Amendments consequential to the commencement of Schedule 5 to the Consumer Rights Act 2015”, which affect 50 or 60 (I lost count) sets of regulations, starting with the Crystal Glass (Descriptions) Regulations 1973 and ending with the Cosmetic Products Enforcement Regulations 2013.  A masterpiece, without question.

2.  Minimum Energy Efficiency Standard

When the regulations to implement the Minimum Energy Efficiency Standard were introduced shortly before the general election earlier this year, the start date of 1 April 2018 seemed to be comfortably far away in the future.

As at 1 October 2015, it is exactly 2½ years away.  That’s beginning to feel uncomfortably close.

Incidentally, here are details of a talk I will be giving in London on the regulations on Monday 12 October for the Commercial Real Estate Legal Association.  Tickets are still available, and both members and non-members will be welcome.

3.  My final blog article

Many readers will already be aware that I have recently taken up a new role as a professional support lawyer in the Real Estate Group at Shoosmiths.  It is therefore no longer appropriate for me to continue writing blog articles on this website, so this will be the final one.  I am sure that I will be writing occasional articles for the Shoosmiths website.

Thank you to all my readers of this blog for your ideas, questions, support and encouragement.

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New exception from protection afforded by Landlord and Tenant Act 1954 11 August 2015

A new exception is to be introduced from the protection afforded by Part 2 of the Landlord and Tenant Act 1954.  We are already familiar with contracted-out leases (in section 38A) and tenancies of six months or less, subject to some important restrictions (section 43(3)).  On a good day we might even remember that mining leases and farm business tenancies are excluded (section 43(1)).  Now we shall have to get used to the exclusion of “home business tenancies”, once the strangely numbered new section 43ZA comes into force.

Section 43ZA will be introduced into the Landlord and Tenant Act 1954 by section 35 Small Business, Enterprise and Employment Act 2015.  Its purpose is to allow people to work from home without creating the statutory protection that applies to business tenants.

The definition of “home business tenancy” is contained in new section 43ZA(2).  It is a letting of a property as a dwelling to one or more individuals, which requires the tenant to occupy the property as a home but also permits the tenant to run a home business from the property (that use of “requires” the tenant to occupy the property as a home is a bit strange – I would have expected “permits”, but I don’t know if the difference is significant).

What is a “home business”?  The definition is simple: “a business of a kind which might reasonably be carried on at home”.  So anything involving IT sounds OK (apart from running a server farm, perhaps), but not steel-making or soft-drink bottling.  Doubtless there will be plenty of marginal occupations, such as car repairs and pet grooming.  Regulations may be made about what is and is not a home business, by the Secretary of State of the Department for Business, Innovation and Skills in England, and the Welsh Government in Wales (so another opportunity for divergence of law between the two countries, as I have previously observed is happening more and more frequently).

There is an important exception from the new exclusion: by section 35(5) Small Business, Enterprise and Employment Act 2015, new section 43ZA will not apply to any tenancy that was already in existence before it is brought into force.  Curiously the exception is contained in the enabling act (the Small Business, Enterprise and Employment Act 2015) rather than in the Landlord and Tenant Act 1954, so it will be easily overlooked once the provision is in force.  This is lousy drafting.  The exception should be in section 43ZA itself.

There is one other change that will be introduced by section 35 Small Business, Enterprise and Employment Act 2015.  Section 23(4) of the 1954 Act already provides that there is no statutory protection where the tenant is carrying on a business in breach of a prohibition of use for business purposes, unless the immediate landlord or his predecessor in title has consented to the breach or acquiesced in it.  For completeness, new section 23(5) will provide that the landlord’s consent or acquiescence to the tenant’s carrying on of a business will not bring the tenancy within the statutory protection where the business that the tenant is carrying on is a “home business”.  It seems to me that this provision is likely to be a great deal more useful for landlords than the new express exclusion to be contained in new section 43ZA.

 

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Government to end funding for Green Deal 24 July 2015

The Government announced yesterday in this press release that, in light of low take-up and concerns about industry standards, there will be no further funding to the Green Deal Finance Company.   The Green Deal Finance Company, which describes itself as a “not-for-profit” company set up by industry participants and other stakeholders to deliver the Green Deal, says on its website that is no longer accepting any new applications for Green Deals.

The Government says in a new blog article yesterday (artfully entitled “Changes to green home improvement policies announced today“) that the Green Deal’s framework remains in place should other finance providers wish to come forward to enter the market.  If the Green Deal did not work successfully using Government funding, it seems unlikely that any other organisation would wish to step in to fund it.

The Government says that it will work with the building industry and consumer groups on “a new value-for-money approach”.  However, future schemes must provide better value for money, supporting the goal of insulating a million more homes over the next five years and the Government’s commitment to tackle fuel poverty.

This decision has no impact on existing Green Deal Finance Plans or existing Green Deal Home Improvement Fund applications and vouchers.  The Energy Company Obligation (ECO) will continue to run as planned until March 2017, to provide support to low-income households.

This announcement is applicable only to domestic properties, as Green Deals for non-domestic (commercial) properties have never been introduced.

To be honest, this decision has come as no surprise, given the low take-up of the Green Deal and the current (not-in-any-coalition) Government’s obvious disdain for the energy-saving agenda.  Green enthusiasts have had a bad few weeks.  Last month it was announced that the subsidy scheme for onshore wind farms will be closed from next April, one year earlier than planned, and on 10 July the Government said that it is scrapping the rules that will require zero-carbon homes from 2016 and zero-carbon non-domestic buildings from 2019.

You can read an article about the ending of the Green Deal on the Guardian’s website here.

UPDATE: There was a discussion about the Green Deal on Radio 4’s You and Yours today which you can listen to on iPlayer here (starting at about 15:00).  It’s entitled “Bothies, Rail passenger assistance, Choose what you pay” (no mention of the Green Deal).

Effect on Minimum Energy Efficiency Standard (MEES)

I have not yet seen any discussion of how the end of the Green Deal will affect MEES.  As originally conceived (as set out in this undated Government policy document), MEES relied entirely upon the Green Deal.  The obligation on landlords (domestic and commercial) was to have been to carry out any works that entailed “no upfront cost”.  In practice, that would mean works that satisfied the Green Deal’s “Golden Rule” – that the energy efficiency improvements would pay for themselves in energy-savings over their expected lifetime.  No Green Deal – no need to carry out any energy efficiency improvements.

This rather neat policy worked satisfactorily for domestic properties, but could not be extended to non-domestic (commercial) properties because of the absence (now and in the foreseeable future) of any commercial Green Deal system.  This led to the seven year payback alternative for MEES as it applies to commercial properties.

So, in theory, MEES should still be workable for commercial properties even after the ending of the Green Deal.  But I think that MEES for domestic properties still relies entirely upon the existence of the Green Deal.  So without a Green Deal, is there any future for MEES for domestic properties?  I am not sufficiently familiar with how MEES is intended to apply to domestic properties to be sure of the answer to that question, but I have my doubts.  I am also unclear whether the new procedure (taking effect next year) under which a residential tenant will be able to request consent to install energy efficiency measures at a property will make any sense without the Green Deal.

Please let me have your thoughts.

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GRESB – a tool for assessing sustainability 25 June 2015

How does one assess how sustainable one’s property, or property portfolio, is?  This is becoming an increasingly important question, particularly for organisations with large portfolios who want to demonstrate their “green” credentials to potential shareholders/investors.

GRESB, the Global Real Estate Sustainability Benchmark, is a measuring tool that is becoming popular.  I recently attended a presentation on GRESB given by Lizzie Batchelor, the Sustainability Manager of Savills (UK) Ltd.  I thought it would be helpful for others to learn about GRESB, and Lizzie has kindly contributed the following explanation.

About GRESB

The Global Real Estate Sustainability Benchmark has been running for 5 years. This is the only benchmark which fully examines sustainability-related issues specifically for the real estate sector. The survey has seen growing popularity, with 637 property companies submitting last year.

The GRESB Survey runs each year from 1 April to 30 June.  The questions cover seven aspects, with the highest weighting falling under “Performance Indicators” and “Stakeholder Engagement” sections. The highest ranking organisations or funds will achieve “Green Stars”.  Last year approximately a third of organisations obtained this status.

Why organisations are choosing GRESB

● Transparent performance metrics

● It is a well-regarded portfolio benchmark, providing assurance to investors, shareholders and other stakeholders.

● Scope to improve PR recognition on sustainability.

● Improving a score may lead to a fall in the operational costs of a property or portfolio.

● Creates a clear focus, helping to engender continuous improvement for the organisation.

This is only a brief introduction, so that you recognise the abbreviation when you see it.  You can find more information about GRESB at www.gresb.com.

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Amended versions of the MCL suite of documents 24 June 2015

An amended set of the Model Commercial Lease documents was made available on the MCL website at 9.00 am this morning.

Further information is available in this news item on the MCL website.

 

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Amended versions of the MCL suite of documents available on 24 June 2015 22 June 2015

The Working Party that prepared, and now keeps up to date, the Model Commercial Lease (MCL) suite of documents has announced that an amended set of documents will be available on the MCL website at 9.00 am on Wednesday 24 June 2015.

Further information is available in this news item on the MCL website.

Declaration of interest (1): I am a member of that Working Party.

Declaration of interest (2): I wrote the text of the news item.

Declaration of interest (3): I loaded the text of the news item onto the MCL website.

That’s enough declarations of interest for now.

INCIDENTALLY

If you wish to receive a personal e-mail when a news item is added to the MCL website, you can sign up on the subscription page of the MCL website.  Over 100 people have done so already.

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The Law Commission’s land registration project 24 April 2015

The Law Commission has started work on its land registration project.  Professor Elizabeth Cooke, the Law Commissioner responsible for the project, explained what it entails at a training event last night organised by the Commercial Real Estate Legal Association (CRELA), held at the offices of Hogan Lovells.

The project comprises a wide-ranging review of the Land Registration Act 2002, with a view to amendment where elements of the Act could be improved in light of experience with its operation over the past 11 years.  Particular areas to be examined will include the extent of the Land Registry’s guarantee of title, rectification and alteration of the register, and the impact of fraud.  There are concerns that the new provisions are not working as intended, and may require a total overhaul.

Other areas that Professor Cooke expects the project to consider include issues around the new adverse possession regime for registered land, the operation of third party rights (including the manner in which section 29 operates), the requirement for substantive registration of easements in short leases (which do not themselves require registering) and complications caused by various categories of overriding interests.

This is not yet a complete list of areas that the Law Commission will be examining.  Professor Cooke would like to hear from anyone who has ideas about provisions of the Act that could be included within the project.  They will only be included if they cause real difficulty (for example, they cost clients money to resolve).  Changes that would be merely “nice to have” will not make the cut.  Suggestions from the audience at last night’s event included the thorny question of mines and minerals (currently the Land Registry’s guarantee of title does not extend to ownership of mines and minerals that may lie below the surface of the land) and a request for the restoration of land certificates as evidence of ownership in an attempt to deter fraud.

Suggestions for topics to be considered within the project should be sent to Professor Cooke’s team at this e-mail address: propertyandtrust@nulllawcommission.gsi.gov.uk.

The timetable for the project is expected to be the publication of a consultation paper in Spring 2016 and the final report and draft Bill in late 2017.  Sadly, Professor Cooke will not be in post to take forward this exciting project, as from June this year she is to become the Principal Judge of the Land Registration Division of the First Tier Tribunal (Property Chamber).  Good news for the FTT but a loss for the Law Commission.

Obviously this leaves a vacancy at the Law Commission.  Details of how to apply to become the next Law Commissioner to lead on law reform work relating to property, family and trust law can be found on the Vacancies page of the Law Commission’s website.   You will need to hurry, as applications have to be submitted by 30 April 2015, with interviews taking place in June.  You will need to demonstrate in your written application examples where your experience matches the essential criteria detailed below.

• Demonstrable expertise in land law and the ability to lead other projects in the field of family and trust law, to a high level, with the standing to represent the Commission;
• Demonstrable interest in law reform with the ability to think creatively to resolve complex legal problems and to take reasoned decisions;
• Strong analytical and logical skills, with the ability to apply these skills to other areas of the law and offer constructive challenge; and
• Excellent oral and written communication skills, with the ability to present complex ideas to a diverse range of audiences including experience of public speaking.

Good luck with your application.

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Plastic bag? That will be 5p please 21 April 2015

When I order a delivery from my local Waitrose, attracted by no delivery charge if I spend £60 or more, the food and other items are delivered in carrier bags that are themselves contained in green crates.  The driver wheels the crates up to my house on a trolley, hands over the carrier bags and takes away the crates.  I am left with a load of unwanted carrier bags.  The driver will take them back but they are recycled, not re-used.  What a waste of resources.

“What happens in Wales?” I asked the driver once.  He told me that there is an option for customers in Wales to opt out of receiving the bags – because (as both of us knew) in Wales shops have to charge 5p for a non-reusable carrier bag, and it is not sensible to force your customer to buy one – or many, in the case of my Waitrose deliveries.  And now, with relatively little fanfare, the Welsh approach is coming to England.

From 5 October 2015, the Single Use Carrier Bags Charges (England) Order 2015 will require large businesses (those with 250 or more full-time employees) to charge at least 5p for a single-use plastic carrier bag, and to provide reports to the Government annually on the number of bags that have been “bought” by customers.  As in Wales, there are exemptions that cover certain types of goods including uncooked meat and fish and “live aquatic creatures in water” (which presumably means goldfish).  “Bags for life” and sealed bags are not covered by the regulations at all.  Biodegradable bags may be the subject of an exemption in the future.

“What happens if I don’t?” is always the question clients ask.  Enforcement is by local authorities.  They will have various powers to question and inspect.  Penalties of up to £5,000 are possible for not charging for bags, not keeping the necessary records and a host of other misdemeanours.

“What happens to the money?” is a question that customers may ask.  Presumably a single-use plastic carrier bag doesn’t cost the retailer anything like 5p, so there will be a profit.  The Government, rather cheekily, says on its website “Carrier bag charges: retailers’ responsibilities” that “Once you have deducted reasonable costs, it’s expected that you’ll donate all proceeds to good causes.”  For this purpose, it says “reasonable costs” does not include the cost of buying the bags in the first place.  Any business that retains its profits from selling carrier bags rather than giving the money to good causes will no doubt end up on the front pages of the tabloids.

What will consumers think?  The cost is not high, and Marks & Spencer has been charging 5p for plastic bags for years.  Other retailers also do so.  There will be confusion when consumers see some retailers charging for plastic bags (because they have 250 or more employees) and other not doing so.  It seems to me that the organisations that are going to find this most problematical are supermarkets (the Government’s impact assessment says that over 7 billion carrier bags were given out in 2012 by supermarkets alone).  When packing in a supermarket, customers are used to taking as many carrier bags as they want.  One bag costing 5p is immaterial – but ten bags costing 50p is beginning to look expensive (and how many bags do you pay for when you don’t know until you have finished packing how many you are going to need?).  And for deliveries, Waitrose (and presumably others) will need to re-invent their packing and delivery procedures, as I explained at the start of the article.

For more information, have a look on the Government’s website about it: “Carrier bag charges: retailers’ responsibilities” and if you want more detail (much, much more detail) have a look at the Government’s impact assessment, which is an astonishing mixture of analysis and guesswork.

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Improvements to Falco Legal Training’s website 20 April 2015

From today you will see some improvements to Falco Legal Training’s website, suggested by you, the users.  Thank you for your ideas and thank you to Tamsin of Pynto Limited, who looks after the website, for introducing these changes so speedily.

Search function

Several people recently have asked for a search function, so you will now find a search box in the top right of those web pages that feature a separate right hand column (which is most pages on the website).

To be honest, I have no idea how the search function works, but it seems to be pretty good at finding things.  So we’ll leave it at that.

Archive of blog articles

When I launched Falco Legal Training’s website about 16 months ago, I had no idea how quickly the number of blog articles would grow.  It’s become quite difficult to find older articles.  The search function will help, of course, but for people who have only recently started to read the articles, I thought it would be helpful to have a complete list of them.

So I have introduced an archive function, which you can use in two different ways:

  • click on “View All” in the top corner of the Peter’s Blog page (and also in the top corner of each blog article) to be taken to a complete list of all my articles, in reverse chronological order (ie with the latest article at the top).  You can also reach that page from a link at the top of the Articles page.
  • alternatively, further down the right hand column on the Peter’s Blog page (and also in the same place on each blog article), there is a list of months and years headed “Archive”.  Click on the one that interests you and you will see the complete text of all the articles in the chosen month.

 

Complete list of my training sessions

A new flyer is available that lists all nine of the training sessions that I am currently offering:

 

Other courses in the Ten Important Pointers series are still being written but the existing six courses should provide something of interest for everyone for now.

You can open (and print) the flyer by clicking on the link in the “Overview” section at the top of the Training courses page.  Alternatively, for those who like the easy life, click here !

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ESOS explained 2 April 2015

Among the torrent of acronyms recently, you may have heard ESOS and wondered what it means.  It stands for Energy Savings Opportunity Scheme (many Savings but only one Opportunity), yet another piece of greenery.  It is not directly related to property, but it would be inappropriate for property lawyers to be ignorant of it.  From the client’s point of view, greenery is greenery and they expect their advisers to have a basic understanding of the key issues.  ESOS is definitely a key issue.

Why ESOS?  Yesterday (1 April, in case you hadn’t noticed), in my article entitled “Government promotes the use of green leases through tea and biscuits“, I wrote about Article 19 of the EU Energy Efficiency Directive.  Today is not 1 April but you may need reminding, as is the case when reading many EU initiatives.  ESOS is the product of the UK’s implementation of another provision of that directive, Article 8.  This is headed “Energy audits and energy management systems” and reads (in part):

1.  Member States shall promote the availability to all final customers of high quality energy audits which are cost-effective and:

(a) carried out in an independent manner by qualified and/or accredited experts according to qualification criteria; or
(b) implemented and supervised by independent authorities under national legislation.

4.  Member States shall ensure that enterprises that are not SMEs are subject to an energy audit carried out in an independent and cost-effective manner by qualified and/or accredited experts or implemented and supervised by independent authorities under national legislation by 5 December 2015 and at least every four years from the date of the previous energy audit.

You will see that this is one of the easier EU requirements for the Government to transcribe into UK law.  We can understand what it says, and see exactly what it requires.  The UK requirement is effectively that organisations that fall within ESOS must carry out ESOS assessments every 4 years.  These assessments are audits of the energy used by their buildings, industrial processes and transport to identify cost-effective energy saving measures.

Who is affected?

The most complicated aspect is working out which organisations are subject to ESOS, since Article 8 says that it does not apply to SMEs.  Broadly, an organisation is subject to ESOS if, on 31 December 2014, it met the ESOS definition of a large undertaking.  Corporate groups qualified if at least one UK group member met the ESOS definition of a large undertaking.

A large undertaking is either

(1) a UK company that either:

– employs 250 or more people or
– has an annual turnover in excess of 50m euro (approx £39m), and an annual balance sheet total in excess of 43m euro (approx £33m); or

(2) an overseas company with a UK registered establishment that has 250 or more UK employees (paying income tax in the UK)

Organisations must notify the Environment Agency (which oversees the scheme) by a set deadline that they have complied with their ESOS obligations. There is no registration requirement.  The Environment Agency does not expect to hear from organisations until they are fully compliant, which must be by 5 December 2015.  As there is no registration, it is not possible to say exactly how many organisations will be subject to ESOS. As with the Carbon Reduction Commitment, however, it is not clear how certain structures fit into the ESOS definitions.

What ESOS requires

ESOS requires the organisation to calculate its total energy consumption and identify areas of significant energy consumption (meaning assets and activities that amount to at least 90% of the organisation’s total energy consumption).  It must also identify energy saving opportunities.  Currently (and this is likely to change), there is no requirement to do anything as a result of obtaining this information.  But, as with CRC a few years ago, the very fact that an organisation has this information to hand must make the board sit up and take notice.  HOW MUCH are we spending on energy?  And how can we reduce it?

The implications for landlords are interesting.  Unlike CRC, which requires landlords to report (and surrender allowances for) energy supplied to their tenants, ESOS requires landlords to exclude energy supplied to tenants.  The implications of this were considered in a helpful article by Emma Hoskyn called “Motivation for slimming down” in Estates Gazette (17 January 2015), which is worth seeking out if you have access to EGi or the magazine (I cannot link to the article online as it is behind the Estates Gazette firewall).

This is only a summary of a hugely complex topic.  The Environment Agency’s compliance guide (which you can see here) is 78 pages long.

 

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Government promotes the use of green leases through tea and biscuits 1 April 2015

Readers will have seen that the Government has been working hard at complying with the obligations imposed on EU member states by various Energy Efficiency Directives.

The introduction (with little warning) of the Heat Network (Metering and Billing) Regulations 2014 is part of this process, to implement Articles 9, 10 and 11 of the Energy Efficiency Directive (you can read my most recent article on the topic here).

Now comes another initiative, to comply with Article 19.  Never heard of it?  You are not alone.  It aims to resolve the landlord-tenant “split incentive”, as people call it.  This arises from the fact that landlords tend to pay for the improvements to (for example) energy efficiency in relation to tenanted buildings, but it is the tenants who reap the benefit in lower occupation costs and greater comfort.  Yet there is little evidence so far that more energy-efficient buildings are “worth” more, in terms of rental or capital value.  Therefore, why should landlords spend the money improving their buildings when they gain no reward for doing so?  Article 19 aims to solve the problem by legislating it away.

Article 19(1) reads as follows:

“Member States shall evaluate and if necessary take appropriate measures to remove regulatory and non-regulatory barriers to energy efficiency, without prejudice to the basic principles of the property and tenancy law of the Member States, in particular as regards:

(a) the split of incentives between the owner and the tenant of a building or among owners, with a view to ensuring that these parties are not deterred from making efficiency improving investments that they would otherwise have made by the fact that they will not individually obtain the full benefits or by the absence of rules for dividing the costs and benefits between them, including national rules and measures regulating decision-making processes in multi-owner properties;

(b) …

Such measures to remove barriers may include providing incentives, repealing or amending legal or regulatory provisions, or adopting guidelines and interpretative communications, or simplifying administrative procedures. The measures may be combined with the provision of education, training and specific information and technical assistance on energy efficiency.”

One specific example – possibly the only example – of an initiative aimed at solving the “split incentive” in relation to energy efficiency is the Green Deal.  A landlord borrows funds to improve its building, and the loan is repaid by the tenant through reduced energy bills – so both landlord and tenant win.  This was the basis on which MEES was sold to us.  Unfortunately the Green Deal has not been a success for a variety of reasons, and there is no sign of a commercial version (see my article entitled “MEES commencement order is made” on 30 March 2015).

Green tea leases

Now the Government is pinning its hopes on green leases.  A green lease, according to the Better Buildings Partnership, is “a standard form lease with additional clauses
included which provide for the management and improvement of the environmental performance of a building by both owner and occupier(s)”.  The BBP publishes a variety of excellent “toolkits”, one of which is called the Green Lease Toolkit (available at www.betterbuildingspartnership.co.uk and also available as an app for your iPad).

The concept of a green lease originated with the Australian Government, which for some time has insisted on an environmental schedule in the majority of leases that it enters into (whether as landlord or tenant), aiming to get both parties talking to one another about how to improve the energy efficiency of the building (there is a useful policy document here).  Therefore it is appropriate that the UK Government has just announced a similar initiative – albeit several years later.

The Government’s new initiative is being promoted through the Energy Efficiency (Yearly Oversight Review) (England) Regulations (a separate set of regulations will apply in Wales if the Welsh Government follows the English example).  These are still in draft at this stage, and about to be the subject of a consultation exercise.  They will imply into every commercial lease a series of provisions along the lines of green lease provisions.  The key requirement is for the landlord and the tenant (or tenants) to establish a forum for discussions about the environmental performance of the building.  It is believed that the requirements will be left relatively vague, and this suggestion from the BBP Green Lease Toolkit is likely to prove helpful:

“Owners and occupiers should agree a forum for discussion of issues related to Environmental Performance. This may take a variety of forms depending on the size, nature and complexity of the Building.

The forum should communicate periodically to:
• Ensure effective communication of operational performance data.
• Set and review an environmental management plan for the Building including specific targets.
• Ensure maintenance and cleaning services are aligned with sustainability       targets.”

Much the same sort of requirement is contained in the sustainability schedule in the Model Commercial Lease, of course, although this has been introduced too recently for us to be able to draw any conclusions as to whether this sort of “light green” lease proves popular with owners and occupiers of commercial property.

Refreshing originality

What the BBP toolkit fails to address, however, is the issue of refreshments to be served at the forum meetings, and here the Government’s draft regulations are more directive.  Possibly this is because they have been prepared by civil servants, famous (perhaps unfairly) for liking their afternoon tea and biscuits.  No matter what sort of forum is chosen, it is vital (say the regulations) for appropriate refreshments to be provided.  Two different schedules contain permissible types of beverage (schedule 1) and biscuits (schedule 2), although additional types of each may be provided so long as sufficient advance notice is given when the meeting is called.  Those with food allergies are well catered for, with gluten-free diets (for coeliacs) specifically mentioned.  Home-made cakes and traybakes are encouraged, although the requirements of schedule 3 then need to be complied with in terms of hygiene, listing of ingredients and packaging.  Both landlords and tenants are likely to decide that buying refreshments will be simpler.

People have been asking why it has taken so long for green leases to catch on.  There are a number of reasons, including reluctance on the part of both landlords and tenants to spend money and time sitting around a table discussing what are seen as unimportant issues.  The Government clearly believes that the problem lies with the refreshments, and has set out to solve that aspect, and obtain some brownie** points from the EU Commission in terms of complying with Article 19(1) at the same time.

You can find further details of the Energy Efficiency (Yearly Oversight Review) (England) Regulations, or EEYORE as they will doubtless become known, on this website.

** Pun definitely intended

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MEES regulations have been made 30 March 2015

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (2015 SI No 962) appeared on the Government’s legislation website today.  They are dated 26 March 2015 but they definitely were not on the website until this afternoon.

These regulations contain the detailed provisions for the Minimum Energy Efficiency Standard (MEES).  More detail (relating to the application of MEES to commercial properties) is available in my article from earlier today “MEES commencement order is made“.

Everything is now in place in readiness for the 1 April 2018 start date except the promised guidance from DECC.  I imagine this will not be available until after the election, since the new Government will want to consider its contents before it is issued.

One hour training session on MEES and commercial properties

My one hour training session on MEES and commercial properties, for presentation within an organisation, is now available, having been tested on three occasions last week.  The session will cover the following aspects of MEES in relation to commercial properties:

  • Landlords’ obligations to carry out energy efficiency improvement works
  • The types of energy efficiency improvement works that may be required
  • Occasions on which MEES will not be relevant
  • Key dates for compliance
  • Exemptions and the exemptions register
  • Enforcement and penalties
  • Likely effects on new and existing commercial leases
  • Practical solutions for property owners

 

Further details are available on this web page

New one-hour course: Minimum Energy Efficiency Standard Regulations for commercial properties

For those who still have some funds to be spent before the end of the budget year, some dates are still available in April !

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MEES commencement order is made 30 March 2015

The commencement order that brings the Minimum Energy Efficiency Standard (MEES) into force was made last week.  For MEES anoraks, it’s the Energy Act 2011 (Commencement No 3) Order 2015.  It brought into force the relevant provisions of the Energy Act 2011 on 26 March 2015.

The detailed regulations – the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 will be made this week.  They were approved by both Houses of Parliament last week.  There was no debate in the House of Lords.  You can see what little debate there was in the House of Commons in this extract from Hansard.

I have to admit that I never expected to see this day.  I have always thought the concept of MEES too complex to be able to implement – and I may be proved correct in the coming years.  But the legal framework, at least, is now in place.

Two unknowns

There are still two massive unknowns.  First, who is going to have control of the penalties arising out of breaches of MEES ?  This is apparently undecided within Government.  If the local authorities, who are the enforcement agents, are permitted to keep the money, I foresee a new industry could grow up.  The maximum penalty in relation to commercial properties is £150,000.  That would pay for a whole department of people to enforce MEES in a local authority.  This could become a great way to finance local government.  Local authorities have just been told to stop using car parks as a funding device.  Maybe MEES will replace car parks in that role.  I can’t see voters minding about that.

Secondly, will there ever be a commercial version of the Green Deal ?  The whole concept of MEES was built upon the idea of “no upfront expenditure by the landlord” (see this policy briefing from DECC, undated but probably late 2011/early 2012).  The landlord would make the investment in energy efficiency improvements, but the costs would ultimately be borne by the tenant through the Green Deal.  For various reasons, the Green Deal has not proved popular, and everything I have heard suggests that there is not going to be a commercial version any time soon.  So the concept of “no upfront expenditure by the landlord” has gone out of the window.

In its place, we have the seven-year payback concept.  If an improvement pays for itself within seven years, then it has to be made (provided all the other conditions are met).  But this is going to cost landlords real money – possibly real money that they do not actually have, and cannot borrow.  A property that has been made more energy-efficient does not necessarily have a higher rental or capital value.  That depends upon what else is available in the immediate area.  Some properties may just not be worth improving.  They can still be used for owner-occupation, of course.

I have just finished writing an article about MEES for Estates Gazette with Charles Woollam of Sustainable Investment & Asset Management (SIAM).  I think it will appear next month.  It considers the practical aspects of what landlords need to consider, and makes the point (among many others) that there are still going to be plenty of F and G rated commercial buildings around even after 2023, because there are going to be many buildings where the cost of improvements does not meet the seven year payback rule.  This will particularly be the case with air-conditioned office buildings.  Landlords will still be permitted to let them – if they can find tenants to take them.  If there are other similar buildings in the area that are D or E rated, tenants may prefer to take them.  So landlords may, in effect, be forced into carrying out works that will cost more than they are required to spend by MEES, just to continue to have a lettable asset.  Everything will depend upon the local market.

Rap on the knuckles for DECC

Finally (for today, anyway), for a bit of amusement you might like to have a look at this report from the House of Lords Secondary Legislation Scrutiny Committee on the MEES consultation process last year (and thank you to John Staheli at Nabarro for drawing it to my attention).

This in particular caught my eye:

“Given that DECC’s consultation ran from 22 July to 2 September 2014, largely a holiday period, we asked whether the Department considered taking mitigating action, and whether any consultation respondents criticised the timing of the consultation process. DECC has told us that officials ensured that stakeholders had sufficient capacity to provide feedback; and that a very small minority of respondents referred to the timing of the consultation, or sought extensions to the deadline, and they were told that only views provided within the set consultation period would be guaranteed to be considered. We recognise that the Department had worked with interested parties over some months; however, we consider it bad practice to hold the formal consultation process over the August holiday period, given that there may well have been individuals and organisations who wished to respond to the consultation and who had not been involved in the sector working groups.” (emphasis in the original, not added by me.  I’ve never been able to write that before)

This echoes very much this comment in my consultation response:

“As you are already aware, I believe that the six-week period for consultation has been insufficient, particularly as it fell exactly over the school holiday period. Few committees and groups meet during that period, so you will be receiving fewer, and less considered, responses to the consultation than would have been the case had you consulted for a longer period.

The spring 2015 deadline for making the regulations is no doubt well-intended, but it is an entirely arbitrary deadline. This policy is too important for the process to be rushed through merely to ensure that the regulations are in place before the 2015 general election. If it turns out that further time is needed, it should be provided. I fear that it will otherwise be a case of more haste, less speed.”

In the end, there were just 49 responses to the consultation, which is lamentable given that MEES is potentially going to affect all landlords, whether of commercial or residential property.  Even those with property with E and D ratings will ultimately be affected, when the minimum standard is raised, as it undoubtedly will have to be if the UK is to meet its climate change obligations.  No-one can tell whether the poor response was related to the timing of the consultation, but there must surely have been some connection.

 

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The heat is on: postponement of registration date for Heat Network regulations 26 March 2015

The Heat Network (Metering and Billing) (Amendment) Regulations 2015, made on 25 March 2015, put back the date for registration from 30 April 2015 (a date with which compliance was practically impossible for many organisations) to 31 December 2015.  They also tidy up some of the drafting in the original regulations.  Exactly what the effect is still has to be investigated.

For further information about the Heat Network regulations, see these previous articles:

The heat is on

The heat is on (continued)

The heat is on: resolving the underlettings concern

 

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The heat is on: resolving the underlettings concern 25 March 2015

This is the third in a series of articles about the Heat Network (Metering and Billing) Regulations 2014.  You can read the first article (“The heat is on”) here and the second article (“The heat is on (continued)”) here.

These regulations have appeared virtually out of the blue, and are going to require considerable expenditure of resources – both money and time – on the part of landlords of multi-occupied buildings.  They affect district heating networks (not our problem) and buildings with a common heating system (definitely our problem).  In summary:

  • landlords need to register each affected building, individually, by 30 April 2015 – which will require a considerable amount of technical information to be provided to the National Measurement Office (NMO), which will police the regulations.  It is now being suggested that the date may be put back, or alternatively that partial registrations might be acceptable by the deadline, with the full information delivered later.  This has not yet been officially sanctioned, but there seems little chance of full compliance.  There are simply not enough engineers in the country to carry out the necessary work within the next five weeks.
  • landlords will then need to install meters to measure the supply of heating, cooling and hot water to each individual occupier, where it is viable to do so.  Where it is not viable, other steps have to be taken, where it is viable to do so.  This again will require considerable amounts of technical input.  It has to be done by the end of next year.
  • landlords will have to bill on the basis of actual use of energy by individual tenants.  It is not clear whether, and if so in what way, this requirement will override the provisions in individual leases.

 

Underlettings

In my previous article, I raised a query about how the new provisions will apply to underlettings.  The relevant definitions that troubled me in the regulations are:

“heat supplier” means a person who supplies and charges for the supply of heating, cooling or hot water to a final customer, through— (a) communal heating; or (b) a district heat network

“final customer” means a person who purchases heating, cooling or hot water for their own end consumption from a heat supplier

My concern was that I did not think that the intermediate landlord could be treated as a final customer, given that the energy was not being purchased for its own consumption.  Without a final customer, you don’t have a heat supplier either.  One depends upon the other.  So this could mean that the regulations cannot work wherever there are underlettings in a building – which could be a handy means of sidestepping them entirely.

After discussions with other anoraks earlier this week, I have concluded that there is a solution: the intermediate landlord must be a heat supplier.  Then you have a relationship of heat supplier–final customer for each level of letting in a building.  On that basis, the structure fulfils the requirement of the regulations.

This doesn’t necessarily make sense linguistically.  I don’t consider an intermediate landlord – who may simply be the tenant of one floor who is underletting his premises – to be a “heat supplier”.  He doesn’t have any heat to supply.  The heat is being supplied by his landlord.  But it appears that you don’t have to produce heat in order to supply it.  One diagram in the NMO’s guidance document shows a landlord obtaining heat from a district heating system (effectively a supply of hot water into the building from a central boiler outside the building).  The guidance says that the landlord is a heat supplier to its tenants – even though (although this is not emphasised) the landlord is not creating its own heat.

So the conclusion is that each landlord in a building will be a heat supplier – with all the obligations that brings.  There is one further complication, however: there is a common heating system for the purpose of the regulations only where there are two or more occupiers.  So if a tenant of one floor underlets the floor as a whole, the tenant (as landlord) is not a heat supplier under the regulations.  However, if the tenant underlets the floor to two (or more) occupiers, then it is a heat supplier and needs to comply with the regulations.  In particular, it will need to install meters to measure the supply of thermal energy to the two separate occupiers, if this is viable (assuming, of course, that the meters are not already there).  Given that the tenant will almost certainly not be entitled to touch the relevant pipes, because they belong to the superior landlord, it seems inevitable that the installation of meters in those circumstances will not be viable.

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