As the year draws to a close we take a look at how the Carbon Reduction Commitment Energy Efficiency Scheme has been modified from an incentivised ‘cap and trade’ scheme into something resembling a green tax. We highlight the reduction in service from the Essex Fire Brigade following the Coalition Government’s comprehensive spending review and also look at how the Better Building Partnership (BBP) is looking to collaborate with occupiers to deliver more sustainable buildings.
Are you ready for the festive shut down? If you approach it sensibly it could save you money and give you peace of mind. We also take a quick look at the January increase in VAT, and finally we look at why we believe you should work with your landlord, in our Q&A.
''For a current update film on CRC and necessary behavioural change,from leading UK influencers, go to... Property Week [PW.cffnbzelmoqwzqmecoz@propertyweek.ubm-info.com]''
Major adjustments to CRC by Coalition’s CSR
In its simplest form, the impact on business will be postponed, as the 2011 allowance sale (for 2011-2012 emissions) will now not take place until 2012.
The second fundamental change is that the revenue generated from such sale will now not be recycled to participants but will be retained by the Exchequer, thereby effectively switching the scheme into a Green Tax. The original legislative net which was used as a driver towards less energy consumption contained an opportunity for reward for lower usage plus positive PR benefits but no longer…the Scheme’s simpler format now just looks like additional cost to participants. The League table,however does remain so this still offers a reputational incentive for businesses.
And this cost looks like arriving during 2012 and may appear as a ‘double-whammy’ as participants will have to buy their 2011-12 allowances plus those for anticipated usage during 2012-13.
Uncertainty still remains as to a Landlord’s ability to pass on certain CRC costs to Tenants and as before, much remains enshrined in the wording of existing leases, plus the ability of parties to agree suitable wording in new leases. Now that CRC more closely resembles a tax, it seems that in those buildings where the landlord procures power and recharges the tenants, he may be able to obtain CRC cost repayments too as part of a Tenant’s covenant to pay all outgoings(including taxes). Tenants will no doubt try to argue against this being seen as a Tax, and indeed if a Landlord requires additional allowances he will be forced into the secondary market to buy more, which, in itself does not resemble a tax.
If the balance of power is now drifting towards Landlords, we wonder what implications there are for new leases where a Tenant may be shortlisting very similar buildings but due to the difference in ownership structures between landlords, one may be looking to the tenant to pay CRC costs, whereas another may not be even falling within the range of the CRC regime at all. The impact could, therefore be felt by small as well as large occupiers, and noteably, if a non- CRC Landlord sells to a CRC one, the impact for the occupants could be very real.
The Government has now called for a period of Consultation on the subject until December 17th 2010.
Fire brigade no longer responding to business alarms
Fire fighters in Essex have confirmed that they will no longer respond to automatic alarms from business premises or from calls from telephone kiosks that are abandoned.
They say that this is because some 97% prove to be false alarms and they want to ensure that their operational resources are deployed more effectively.
Essex’s Chief fire officer said that taxpayers should no longer bear the cost of businesses failing to maintain their alarm systems and that there exists a greater need to have teams ready to respond to real emergencies.
This clearly illustrates the need for landlords, property managers and occupiers to undertake the necessary and regular checks on the systems that their manufacturers require.
Outside of Essex therefore, parties responsible for the building’s system, should also check with their local fire authority to understand upon what basis a fire crew will attend an alarm call out.
Better Building Partnership Forum 2010
On November 10th, TAP attended the BBP Forum 2010 which was entitled ‘Owner Occupier Partnerships-Panacea or Impossibility?’
The BBP is a collaborative organisation made up of some of the largest commercial and public property owners in London, and, as their mission statement sets out..’’All members are working together to improve the sustainability of London’s existing commercial building stock and accelerate the reduction in CO2 emissions from those buildings’’.
The Forum addressed 3 topics which were attended by all participants in rotating groups; they were
1. Sustainable Retrofit, energy performance contracting in multi-occupied buildings
2. Transactional and Letting Agents; a key role to play in promoting sustainability to both owners and occupiers?
3. Owner Occupier partnerships; what can realistically be achieved?
In brief, the messages from each were as follows:
1. This follows a model in contracting with ESCOs (Energy Servicing Companies) and participants should view them as an ongoing service rather than just a cost item; they need simplification and to become an industry standard with a recognised seal of approval; but at a primary level there still needs to be co-operation between Landlord and Tenant, as a Landlord cannot simply compel a Tenant to make building or spacial improvements. The Forum concluded that there would always be an issue when talking about ESCOs in buildings with short lease terms remaining.
2. Agents knowledge was deemed to be poor and lacking in detail of issues facing both Landlords and tenants. Few, if any firms were educating agents sufficiently, enabling them to guide clients in matters of sustainability with most agents still focusing on the 3 Heads of Cost (i.e. Rent, Rates and Service Charge). There were regional differences noted with London tending to fare better. The BBP saw fit to provide Tool Kits and a Charter for their agent members to adhere to.
3. There were barriers to overcome, namely Who pays, who benefits, Trust, Interests not being aligned, lack of common language, education, how to treat existing lease agreements, is the financial prize worth the effort and the supply chain .i.e. is the property manager meant to be undertaking much of this work?
As a general summary of the event, it seems that many sustainability issues are still out of sight and out of mind and the BBP will continue to see itself as one champion in the mission to better broadcast these important messages. They conclude that they need more Forums, to engage with more occupiers, to produce more Tool Kits, to highlight more case studies and to make more interactive use of their website.
There is clearly still a long way to go to affect behavioural change in this area.
Festive shut down – How prepared are you?
For many us we look forward to the festive period with delight after a long and often challenging year, and that can mean we shut and lock the door on Christmas eve and hope nothing happens while we’re all enjoying the annual celebrations. However, as a company, what contingency is in place should something happen? Does the property manager or your landlord have your contact details? Where is your business insurance policy? Have you turned off all non-essential equipment?
Many of these questions you may think are common sense but you would be surprised how many businesses are not prepared for this eventuality. It is also important to appreciate that in the winter with much colder weather, the chances of potential accidents relating to burst water pipes or electrical faults can be higher than other times of the year.
In many multi-occupied properties the landlord or property manager will have in place some form of security cover and this may involve a red care security alarm with a telephone link to a monitoring station, periodic patrols by a security firm or constant 24hour security presence. In each situation should an incident occur it may result in the need to have up to date contact details. Not only is it important for an occupier to pass on their key holding information but it will also be important for an occupier to know how they can contact their landlord or property manager.
However, an occupier may want to use the services of a key holding company who, as the title suggests, can hold a set of keys on behalf of the occupier and it is they who will be called first in the event of a problem. Costs for such a service would range between £350 - £750 per year and would depend on where your office is located.
VAT – When does it increase?
Following the Coalition Government’s Comprehensive Spending Review, VAT is set to increase early 2011; any invoices raised on or after the 4th January 2011 will attract the new level of VAT. This is the third time in as many years that changes have been made to the level of VAT with the rate reducing in 2009, returning to its original level in 2010 and, now at the start of next year, increasing to 20%.
The rules surrounding when and how much VAT to charge are complex at the best of times and so when there is a change in rate or circumstances then interpretation can prove even more difficult. However, in simple terms if you’re a retailer and you sell an item on or after January 4th then the new 20% rate would apply, however, should a customer take delivery of an item before this date and an invoice is raised after January 4th then the supplier can apply the lower rate of VAT.
This is only a simple example that shows it is not straight forward and so we have found the easiest place to look, should you not have access to an accountant, is HM Customs & Excise (www.hmrc.gov.uk/vat and then search under ‘rate increase’). This will provide you with simple details on how to interpret the rate changes.
Q&A As a business,how important is it to work with my landlord?
Traditionally the relationship hasn’t always been co-operative between the landlord and the tenant despite the obvious benefits that can flow from having such a good understanding of one another’s needs. Trust is at the heart of the relationship and is not always regarded highly enough. Over the years both tenants and landlords have gone to extreme lengths to hide aspects from one another about what each party wants from a property but of late this is changing.
Combining the downturn in the economy, the general decline in lease term lengths and the common desire to see a more sustainable environment is, in our opinion, bringing landlords and tenants together. It is important to note that it is the landlord who has the opportunity to enhance the services on offer to a building, albeit with the co-operation of the occupiers. In answer to the shorter leases being offered and demanded , the opportunity for landlords and tenants to work together is becoming more relevant and this is happening.
Furthermore, with external factors such as increases in fuel prices and the emergence of green taxes, the need to enhance a property’s efficiency is no longer a luxury and more a necessity. Value for money can be demonstrated more easily now as financial benefits can be identified given the increase in technology versus cost of energy. The growing cost of supplying energy to a property is forcing more innovation and the need to form a better working relationship with your landlord is now essential.
Throughout the life of a lease an occupier will need to make changes to their demise, may even require to assign or sub let space or install equipment outside their demise and this will require co operation from the landlord. This co operation is based on honesty and trust and underpins a strong working relationship. It is now a requirement of both the landlord, tenant and property manager to be more accessible and open with each other and we would promote the need for an occupier,where appropriate to support this working ethos as it will benefit them in the long term.
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