July E Newsletter

Editorial:  Welcome to our July 2011 e newsletter.

Many of us our looking forward to well earned summer holiday but before you go you may be interested in our latest snippets of news.  We highlight the potential fines you may receive if you treat a property without having an EPC.  When a lease expires have your given thought to considering what gas is in your air conditioning compressor?  It may have an impact on any dilapidations claim. 

Energy prices continue to rise and people are trying to harness solar energy, but have you thought about the terms a company may want to site their panels on your roof?  We take a brief look at the Climate Change Committee’s latest report on the state of our emissions – it seems they continue to rise, not fall!

Do you know the definition of ‘structure’ we look at a case that helps clarify this and finally our Q&A takes a look at pest control.


Avoid being fined for failing to get an EPC

Since 2008, The Energy Performance of Buildings Directive (EPBD, 2010/31/EU) has been the impetus for the ‘relevant person’ (i.e. the Seller/Lessor) to commission an Energy Performance Certificate prior to the commencement of marketing a property for Sale of Lease.  Should Trading Standards Officers check and find that person to be non-compliant, then they can impose a fine of up to £5,000 per property, dependent upon the Rateable Value of the property.

The Government recently announced that it was extending this responsibility to include property agents too, such that both parties would become liable for a lack of EPC, and both be fined.  Such an inclusion was to have taken place on July 1^st 2011 however at the last minute they postponed the change to an ‘unspecified date’, but there is no doubt that a re-formatted timeframe will be announced shortly to ensnare both parties.  The change is also to include a reduction from 28 days to 7, within which the ‘responsible person’ has to secure the EPC, once its omission has been identified.

Government intentions to reduce emissions within the property sector are becoming more stringent and, albeit some way off yet, they have announced that as of April 2018, it will be illegal to attempt sell or lease a property that has an EPC rating of F or G.  A long lead-in time, but illustrative of the need to make necessary alterations.

Real Estate commentators are also confident that the more relevant Display Energy Certificate (DEC) that is currently applicable to public buildings, will become the norm for all properties and view April 2013 as the likely introduction date, warranting the commissioning of a further detailed inspection. TAP suggests that pre-empting this further change should best involve the collation of energy data from at least April 2012, to be able to show a clear 12 months of data.  If no data is provided at the relevant time, Government has indicated that a property will automatically be awarded a Grade G certification.

TAP recommends that if your organisation is contemplating disposing of space, then the commissioning of an EPC is one of the first steps you undertake, and similarly, if you are looking to commit to new space you are confident that you know its energy rating before signing.

We can direct you to a suitable Assessor if required.


Matters to consider for both parties at lease end or break

In the lead-up to a Tenant leaving a property, whether by effluxion of time, sub-letting or by way of exercising a break clause both the landlord and tenant should be looking closely at the lease to establish whether or not ‘vacant possession’ has been achieved.

Regrettably the phrase has no firm legal definition but the wording’ physical or legal impediment to enjoying the property goes a long way in helping.  This may involve tangible impediments as well as chattels and fixtures, and their retention at the property may often lead to a break clause condition failing.  Both parties to the lease need to look closely at the wording and seek advice if necessary.

Another specific issue that may arise in a dilapidations negotiation involves the treatment of Ozone Regulations and in particular how the HCFC known as R22 is viewed.  This is the coolant commonly used in air-conditioning systems and since 2000 its use has been banned in new systems.  Since 2010 it has been banned as a top-up fluid for existing systems and from 2015 its use as a re-cycled top up will also be banned.  An alternative, R422d is traded as a drop in replacement but has varying effectiveness, so looking forward there may well come a time when replacement of the entire system is necessary.  This will have implications at lease end, where a Tenant is obliged to adhere to statutory compliance clauses and may be asked to replace cooling systems that they control as a condition of departure.  At this time, provided they can show that a recycled R22, or equivalent, can still be used, then replacement is unnecessary…so far.

Two other matters are worthy of note: firstly that under the Financial Reporting Standard 12 a future dilapidations liability can be treated as a deductable expense for Corporation Tax purposes and can be excluded from the Company’s calculations until spent, therefore illustrating the benefit of undertaking a review of anticipated liability, in preparation for lease end.  Secondly, if a tenant has been occupying a multi-let property its worth taking advice on the treatment of service charges, especially if one is looking to sub-let or break the lease and any ongoing liabilities.  Both a landlord and tenant should refer to the latest RICS Code of Practice for Service Charges in Commercial Property to assist in clarifying uncertainties.

Finally, there is no substitute for consulting the exact wording of the Lease to be clear about conditions attached to a lease ending and in many cases professional help should be sought.

TAP can assist by pointing you in the right direction for such help.

Make sure you get it right when agreeing a lease for solar panels

It’s become quite common for companies, offering to install and operate solar panels, to canvass commercial property owners as an opportunity to help the property owner reduce the cost of energy to their tenants.  With the introduction of the Feed-In Tariff (FIT) and the strict carbon reduction targets the government has identified, the use of solar panels to generate electricity offers companies the ability to try and take advantage of the large roof spaces on offer across many of the commercial properties in the UK.  Often the installing and operating company will require of lease of the roof space.  But is it just a simple task to sign the agreement offered by the installing company or are there elements you need to think about? 

If you are a leaseholder you may have to obtain your landlord’s consent.  That may not be difficult although give thought to the terms of the lease that may involve sub-letting of part of the premises and security of tenure.

These solar panel installations can take up a large amount of the roof space and so if the property is multi-let consideration may need to be given to space required by other occupiers for additional equipment.

The importance of having the installation properly fitted and in compliance with the manufacturers specification is equally important as it will ensure no faults can be attributed to the building owner should it not function properly.  How are the panels maintained?  How often and by whom?  What about the removal costs and reinstatement of the area at the end of the lease?  Who takes the responsibility for these elements in the agreement?

Understand the insurance arrangements, does the installation come under the buildings insurance and who covers the extra cost?

It is not only the solar panels that are covered by the agreement but also the FIT meter.  Access will be required to the meter for routine maintenance. 

It is fair to say that with increasing energy prices the attraction to look at ideas which clearly have a financial benefit for all concerned is tempting but with all such proposals it would be sensible to carefully look at the terms of any agreement. 

If you have had such an approach and would like to discuss the potential terms being offered then please do call us on 0800 865 44 50.

Climate Change Committee says new tools are needed to hit reduction targets

In its 3^rd Progress Report the CCC has shown that during 2010, overall emissions actually rose by 3%, which is clearly incompatible with the 3% cuts that the Government claims are needed on an annual basis.  The CCC claims that, set against its “carbon budgets”, 2010 was actually within budget but only by virtue of the ongoing economic downturn which reduces activity and hence emissions.

The Committee’s CEO David Kennedy pointed out the whilst the economy grew by 1%,overall emissions stayed flat, and he  remained unsure what would happen if the economy grew by 2%...i.e. would emissions go up, or remain flat?

Either way it seems to point to the fact that there still exists a historical link between economic growth and C0₂ emissions; Methane emissions, on the other hand actually fell.  Mr Kennedy went on to say that in each of his committee’s 3 reports to date, a “step change is needed” and that the UK “needs clear, stable and strong policies that will unlock the potential of a low carbon economy” and that new tools are required to meet reduction targets.  He referred to virtually no progress being made on insulating cavity walls and changing transport trends, with the exception of an above expectation fall in the average emissions from new cars, from 149g/CO₂/km to 144g/CO₂/km.  He called on the Government to be consistent and clear about the functionality of the Green Deal, The Green Investment Bank and an electricity market reform, akin to the de-carbonisation witnessed in France, leading to a slower rate of price rises as they move away from the dependence on fossil fuels.

Also commenting on the CCC’s report is the UK Green Building Council, who’s CEO Paul King  points out that whilst it makes disappointing reading there may be a glimmer of hope in the construction industry via the Government’s long awaited response to the Low Carbon Construction Innovation Growth Team’s recommendations and the fact that Mark Prisk, the Minister responsible for Construction, has personally committed to Co-Chair a new Government/Industry Green Construction Board to oversee a new action plan for the sector.

Maybe, at least, the construction industry is set to take a lead in this essential battle to address meeting emissions targets regardless of economic circumstances.


Is the plaster, covering the wall, part of a building's structure?

The recent case of Grand vs Gill saw the Court of Appeal judge rule that in this case the plaster formed part of the structure.  This case involved a residential tenant but the facts and conclusions can be referred to in commercial cases.

The circumstances involved a tenant claiming that repairs to the defective plaster were the responsibility of the landlord.  The damage to the plaster was caused by condensation which the courts rules was as a consequence of a design defect to the property. 

The court ruled that the plaster formed part of the structure and this was distinctive to the definition of decoration which was the finish that was applied to the plaster’s surface.  Why is this ruling important?  Many leases refer to the structure of a property without any real definition of the term.  This case helps to define the definition of the term structure and will assist tenants, landlords and property managers to further understand the meaning when interpreting the lease. 


Question & Answer

Pest Control - Do I need to have my own contract?

It’s not unusual for a property manager to be challenged over whether it’s necessary to have a pest control contract for the property; especially if there’s been no sign of any pests.  It’s often said that those using the building never see any pests but that phrase alone supports the notion that the pest control contract is working well and keeping rodents and other pests at bay.  However, generally any pest control contract will take a proactive approach keeping mice, rats and the odd pigeon infestation at bay and react to other pest sightings as and when they occur.

It is known that when properties are demolished and rebuilt this has the tendency for mice and rats to be displaced leaving them no alternative other than to move into another property.  Over recent years the development in some areas of the country has dried up but with the dust sheets being pulled off the tower cranes it now maybe the time review the pest contract arrangements.

Additionally, the action of tenants can sometimes be the source of rodent activity especially if employees eat at their desk or store food in their pedestals.  If it’s noticed that rodent activity has taken place then it would be wise to inform the property manager immediately. 

As Mike Williamson of Cleankill points out “A mouse can get in through a gap the width of a pencil, cockroaches can be brought in on cardboard packaging, fleas may be picked up on public transport, pigeons will make the most of those wonderfully designed architectural ledges on the outsides of buildings – and flies will just fly in!”  So the fight against pests is a never ending saga.

So is there anything the facilities manager could be doing to limit the risk of pest infestations?

1. See what the landlord or their property manager has in place.  It may be that they have put in place a suitable contract for the common parts but that you as a tenant may need to add to this basic arrangement.
2. Look at reducing the areas that rodents could access. 
3. Remove food from draws on a regular basis to ensure rodents aren’t enticed with biscuits, fruit or other nourishing substances.  If you’re looking at pigeons you may wish to ensure the netting or windowsill spikes are in place.
4. Work with your property manager, and their pest contractor, to ensure a strong understanding of the concerns you are experiencing are dealt with in the most efficient manner.

If you have any question please call us to discuss.