Welcome to our first e newsletter of 2011.
We continue to draw your attention to topical issues affecting the occupation of commercial property and intend to complement these with Case Studies throughout the year which illustrate some of the points that we make, and in some instances with worked examples of how certain savings can be made.
Initially,however we start the year off with articles on:
Interest free Energy reduction loans, the impact of League Table positions for those within CRC, a VAT ruling for Hot Food retailers, a glance at the Service Charge Code, workplace and the mobile workforce and a Q and A on Greenhouse Gases. We hope you find it all of interest.
Would you find an interest free loan helpful?
Regardless of what business you operate, lighting may represent up to 40%1 of your annual electricity costs and so working towards improving the efficiency of your lighting system could provide worthwhile savings. Whether you are thinking about replacing all your light bulbs for a more efficient element or taking a more long term view and doing this as part of a larger energy efficiency overhaul considering a loan may prove beneficial. A small business can apply for a loan ranging from £3,000 - £100,000 but there is an eligibility criteria that will need meeting. The Carbon Trust has issued a useful eligibility flow chart that will assist in determining if you can apply for a loan and we have added a link to our Environmental page on our Knowledge Centre website.
So are you eligible?
- All Small or Medium-sized Enterprises (SME)
- Private sector organisations can apply for a loan.
- Trading for at least 12 months
With the growing need to be conscious of your energy usage, being aware of these types of services is important and where possible we will bring you more information on other initiatives as and when we are made aware of them.
Footnote - 1Carbon Trust Technology overview on Lighting
Will the CRC league table change the way you procure services?
It would seem that high profile brands will need to be aware of their shoppers’ habits and always be conscious about their league position in the CRC league table, the first of which is planned to be published in October. It would be prudent for many well known brands to aim to hold a position as high as possible, with a minimum being the attainment of the highest rank amongst their peers. Those companies that are less well known may not be as concerned over their position unless they form an integral part of a procurement process where their environmental attributes are considered significant enough for scrutiny.
An interesting point to note was that those companies where their parent company name differed from their trading name felt their results would be cloaked in anonymity. However, how long this secrecy could last couldn’t be said and it would only be a matter of time before they would be exposed.
The conclusion to the Business School’s research is that a league table position IS likely to effect how customers perceive the company.Similarly,a company’s ethical approach to manufacturing could deal an adverse blow to their customers buying habits. Stacey Sunderland, an MBA student at Imperial College Business School, has found that some firms will take the league table extremely seriously and one large energy company said they were committed to being in the top quarter of the league table “at any cost”. Their fear of losing credibility was enough to warrant the expenditure. Consulting firms also felt they were being watched and believed that their reputation and validity were on the line.
Although the jury is still out it seems that people may vote with their feet and be more selective in how they shop.
Please Sir, can I have some more...VAT?
The case involved the food retailer Subway and their efforts to avoid having their products deemed to be ‘’hot food’’ so that their supplies would be Zero Rated for VAT purposes. As their food is prepared for consumption off the premises it was seldom heated up but was stored, in what the Tax Tribunal claimed, was at a temperature above that of ambient air at the point of supply.
It is this specific point which, unfortunately for Subway, led the Tribunal to find that their heated products fell within the ‘hot food’ definition in the VAT Act 1994, and accordingly were Standard Rated. As a result Subway faces a bill for retrospective VAT on hot supplies made in preceding years and they now need to factor in ongoing VAT for such supplies in the future; now at 20%.
The case raises issues for both the supplier/Tenant and their Landlord, as there will clearly be turnover and profit implications which could become a negotiating point in certain leases, notably Turnover leases. This is something which is worth both parties considering.
The Service Charge Code; does it need revising?
The adoption of the Service Charge Code is not obligatory but should a dispute occur between a landlord or tenant then the courts may look at any documents which identify best practice; and certainly the Code is one such document. Graham Chase, President of the RICS in 2006/7 said of the original Code: “Poorly managed service charges are a frequent cause of disputes between landlords and tenants, owners and occupiers, and whilst the Code cannot override existing leases it provides the property industry with a clear set of recommendations which, if implemented, will benefit all sides.“
Even with the Code disputes continue to be arise and many are not as a result of monies being inappropriately spent but more because a tenant doesn’t necessarily have the time, inclination or experience of knowing what to look for in a service charge budget or reconciliation. In these current times costs are rising daily as a result of imported inflation and increases in commodity prices. Managing a service charge and getting it to balance at the end of the year can therefore be difficult, even for experienced property managers.
Generally disputes occur at specific points in the life of a service charge; drafting and issuing the budget, reconciling the annual expenditure, and where an over spend occurs. Why do disputes occur at these points? Primarily because service charges increase year on year and many companies either cannot afford the continual increase or that they haven’t budgeted for an increase. But is it all down to the property manager trying to fleece the tenant? Our experience is no.
It is important for an occupier or tenant to take a keen interest in the costs associated with managing a property and throughout the service charge year could do more to enquire how forecasted costs are performing against the budget. Understanding cost and the apportionment of expenditure is essential for any occupier and although the Code does outline the need for occupiers to be informed where costs vary this may not always happen.
Does the Code need revising? A revision to the Code will not necessarily remove any future disputes as there is more to it than just having a property manager feed information to the tenant. It has been highlighted that the tenant needs to take a keen interest on costs throughout the year and, where the opportunity exists, take action to reduce expenditure. Equally the property manager may wish to explain when costs are increasing and suggest ways of reducing annual expenditure. It is these measures which would promote a better working relationship between the landlord and tenant, not just revising a Code.
Making your space work harder!
Traditionally the proven way to improve space efficiency is to reduce the amount of desk space an individual has; so for example replacing desks with a return with those of a bench style, or reduce the number of meeting rooms. However, this will only deliver a certain amount of saving and does remove the possibility of similar changes in the future. So could more people work remotely? Interestingly the research identifies that ‘Increasing numbers of European employees do not consider they need to be in an office, to be productive’. However, the research goes onto comment that ‘71% of respondent organisations positively supported the notion of a corporate workplace as a strategic asset in the development of the organisation’.
Again the research raises some interesting points, no less than the difference in working practices of the young and the old. With the Government changing the retirement age there will be a greater number of older people in the workplace and so the variation in working practices between the generations will widen. BIFM Strategy Director Stephen Bennett says ‘The oldest and youngest employee groups look for very different things in their workplaces. So those responsible for the workplace are going to have some big issues to address in the way that they create effective office spaces for an increasingly diverse workforce, not to mention an increasing mobile one’.
The biggest factor in planning space is to allow the individual the ability to choose where they can work for each task they perform. This increased mobility will have a huge impact on how workspace is used in the future and combined with increased travel costs organisations may have little choice other than to allow more of their employees to work from home.
Question & Answer – Greenhouse gases; what are they?
So what Gases make up the term Greenhouse Gas (GHG)? The Kyoto Protocol sets out the binding targets for 37 industrialised nations and the European Community for reducing GHG emissions. This Protocol defines the ‘gases’ which are considered harmful to the environment.
The Gases
Carbon Dioxide Symbol (CO2) GWP 1
Methane Symbol (CH4) GWP 21
Nitrous Oxide Symbol (N2O) GWP 310
Hydroflurocarbons Symbol (HFC’s) GWP 140 - 11,700
Perflurocarbons Symbol (PFC’s) GWP 6,500 - 9,200
Sulphur Hexaflourides Symbol (SF6) GWP 23,900
In the UK, CO2 accounts for 86% of the climate impact while CH4 is 7%, N2O 6% and HFC’s 1%.
The Global Warming Potential (GWP) is the measure of how much a given mass of GHG is estimated to contribute to global warming and is usually based on a set period of years, such as 20, or more commonly 100. Evidently, Methane is worse than Carbon Dioxide,with Sulphur Hexaflourides substantially more detrimental than Methane and so we all need to be aware of how we work and what we work with, and how that can impact our Carbon Footprint.
A ‘Carbon Footprint’ is measured in tonnes of CO2 equivalent (CO2e). The qualification of ‘equivalent’ allows for different GHG’s to be compared on a like for like basis but how do you go about measuring your footprint?
- Select your method of calculation as there are a few. Two such methods are Greenhouse Gas Protocol or ISO 14064.
- Define what parts of the organisation should be included in your calculation.
- Collate the data such as meter readings or fuel type if looking at vehicles.
- Convert usage into CO2e by using credible conversion tables.
- Have your data and calculations verified using a recognised organisation such as The Carbon Trust Standard.
- Be transparent when reporting your carbon footprint.
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