September e newsletter

Welcome to our September 2011 e newsletter.

It may not seem so, but the autumn and winter seasons are upon us and as the number of day-light hours reduce we look at whether Shopping Centres can reduce their energy consumption by 2.56% per annum for the next 39 years.

We also take a look at what we can all do to reduce waste and why some companies restrict access to the social media world.  It’s official, the service to occupiers, by their landlord and property manager, is improving and we take a look the results. What do data centres offer? We take a look.

Finally our Q&A takes a look at virtual security patrols and whether they can would benefit the service charge?



Can we deliver 2.56% reduction each and every year until 2050?

The Energy Savings Trust states that shopping centres contribute 3 million tonnes of CO2 to the UK’s total emissions each year. This is equivalent to the emissions of nearly half a million homes. The Government has set a challenging target of reducing CO2 emissions (50% by 2030 and 80% by 2050 from a base measure recorded in 1990) and if shopping centre owners want to meet this level they will have to reduce energy consumption by 2.56% per annum until 2050.

In an attempt to outline how this can be achieved, the British Council of Shopping Centres (BCSC) has issued a report entitled ‘Accelerating Change towards low carbon Shopping Centres’ with the aim of identifing areas that may accelerate the implementation of energy saving projects.  After speaking to a variety of stakeholders a number of elements were identified, where improvements can be made:

A high turnover of staff at grass root level should encourage companies to place the role of energy reduction at Board level.

Retailers are seeking better financial incentives from the Government.

Landlords can play an important part in spreading knowledge of ‘what changes work and what do not’.

In the long-term investment in energy efficiencies must go beyond that which is easy to achieve. We at TAP sense this stage is not too far away.

Communication is often highlighted as a cause for concern in any aspect of property management and all this needs to be improved.

Examples of areas where retail occupiers could achieve savings are numerous but a couple of the lesser known ideas are to reduce the light intensity – 70% of the total intensity before 11am; or look at moving away from the profession norm – large retail units normally have a fit out criteria of 40 watts per m2 and smaller retail units 80 watts per m2 but perhaps look at using high efficiency lighting where it is possible to have 14 watts per m2 in a large retail unit and 40 watts per m2 in a smaller unit.

These are simple wins but the opportunity to take advantage of these situations will become limited as the need to make greater savings takes over. Such projects will need greater occupier collaboration and so communication will inevitably become more important to enable energy to be reduced at the rate the Government wants.



Hardly a Waste of Time, get thinking about your Waste

We all know we should!... and at home our Local Authorities are loading us up with new bins and new pick-up schedules in an effort to get us to focus on how much we are throwing away and where it goes.  This also ties in with the current packaging debate about “Sell by’’ dates, “Best before’’ dates and so on, but within your business, who is taking the lead for what we dispose of and where and should we be thinking about this more responsibly?

Unsurprisingly we believe that we should and set out below some areas for your business to consider:

Waste is a huge subject and not only covers the refuse we collect in bags/bins but also Water, Electricity, transport, fuel, office stationary, pollution and time. It can also attract certain tax breaks and financial incentives, so its worth spending a bit of time on.

If you already use Waste Transfer Notes or have a hazardous waste consignment, from 28th September 2011, you will have to have shown that you have applied the Waste Management Hierarchy when choosing a waste option, and essentially this means you must have looked at:
- prevention
- prepared it for re-use
- give consideration for recycling
- give consideration for other uses…. ie as a biofuel or energy recovery
- disposal options

Consider looking at the useful guides and training offered by WRAP (Waste and Resources Action Programme www.wrap.org.uk).  Amongst a mass of very useful information they run online training programmes such as The Ripple Effect and ReThink Waste.

Consider contacting the Resource Efficiency Helpline on 0808 100 2040

As ‘easy wins’ in the office you can look at:
- refilling toner and inkjet cartridges
- using waste paper as notepaper
- using durable drinking cups not disposable ones
- reusing envelopes and other packaging
- donating used equipment and furniture to charities, including electrical items (see The Furniture Re-use Network)
- using greywater recycling systems in toilets
- read your meters and monitor usage
- print double sided and re use print paper in fax machines
- try not to over-order raw materials which may never be needed
- when replacing energy and water equipment consider buying items on the Enhanced Capital Allowances and Water Technology Lists for tax benefits

As mentioned this is a huge area and we cannot cover all of it in a Newsletter of this size, but there is plenty of advice out there, but some of those organisations above will definitely be of assistance.



Social Media – Many companies are still unsure about the its security

Company managers remain uncertain about the benefits that social media offers the workplace.  Many of these managers also believe viruses, loss of confidential data and the fear that their employees are spending too much time surfing the net also contribute to the idea that restricting access to these services is a safer option.

A survey produced by ClearSwift Research asked 1,529 employees and 906 managers in companies across the world about social media in the office.  Interestingly the results were: -

60% of employers worried about potential virus contamination
49% were concerned about loss of confidential information
40% felt viewing these facilities impacted on productivity
37% believed it could have a negative impact on the reputation of the company

This survey also covered the question of technological advancement in the workplace and concluded that companies were still taking a cautious approach to the introduction of new software systems based upon these results.

However the potential exposure to these security risks has resulted in a number of companies either banning access to the social media platforms or monitoring the individual employee’s use of the web. Of those employers questioned 71% had in place a practice policy on the use of the internet, 68% monitored employee internet activity and 56% blocked the use of certain social networking sites. But this last policy does have an impact on the younger generation as only 35% of 18-24 year olds and 44% of 25-35 year olds would remain at their job if their employer banned the use of certain social media websites.



It's official: Occupier satisfaction is getting better – but not by much

The latest Occupier Satisfaction Survey has been released and occupiers have improved their weighted score to 5.4 (where 1 is dissatisfied and 10 is extremely satisfied) on their landlord’s performance, although when considered more closely 10% felt their satisfaction improved, 75% felt their satisfaction remained the same, and 14% rated their satisfaction as worse than the previous year, so has there been any real change? This is the 5th year the survey has been undertaken.

To give you a feeling for the depth of research to achieve these results, the survey was conducted across a broad section of commercial occupiers although only 159 responses were ‘usable’ and were conducted by a Steering Group from the Property Industry Alliance with Corenet Global. The result can be broken down further and as with previous year’s occupiers, the industrial sector remained less satisfied with their landlord than office or retail counterparts.  Smaller medium-sized enterprises (those with less than 250 employees) are also less than content than their larger counterparts. However don’t take our word for it click through and have a look at the report. 

Areas where improvements were seen as significant are the process for applying for consent, and the process of handing back a property to the landlord. However, aspects that scored low related to service charge arrangements and the landlord’s communication and involvement with the occupier on Environmental matters.

This survey continues to highlight that smaller occupiers still find it difficult to engage with their landlord despite forming the largest “occupier” when you combined the total amount of space they occupy. Much of this is because their access to the right information, (that helps them understand their obligations and commercial requirements), is often priced out of their reach. For tenant satisfaction to greatly improve landlords will have to demonstrate a willingness to find a conduit to ensure that regardless of size, all occupiers receive the right amount of communication.



Off site data storage; the general principles

Companies need to make the best use of their floor space, and many are wondering why they are spending prime city centre rents on technical areas that could easily be housed off-site in secure, managed locations.

The data centre market is big business, and growing and can present opportunities for owners of vacant buildings with the prospect of relatively secure long term income streams (many with fixed increases) and the security and cost effectiveness that many business require for their data.

Essentially a data centre’s function is to provide uninterrupted, resilient services with the necessary cooling and ventilation that the systems best perform within. Additional services will include security, repair, common part maintenance and back-up against service interruption and it is usually these features that represent the components of a separate services agreement which is best linked to the ‘lease’ so that the termination of one can include the other. This ability for the tenant to terminate in the event that the services are unacceptable or breached is an important detail.  Furthermore, a tenant can expect to have their non-interruption backed up by service credits, liquidated sums which can be credited against rent or service fees. These features are key to the agreements and tend to illustrate where differences lie between tradition occupational leases, which tend to focus on alienation and repair obligations.

In such a model the actual lease rent can be as low as 10% of the total agreement, the balance representing the receipt of services. Such a low rent percentage also has the benefit of minimising Stamp Duty Land Tax applicable to the rental consideration. Electricity tends to be charged separately, as are any other services requested. 

Difficulties can arise when the centre needs to undertake repair or upgrade works and these need to be handled very carefully between the parties, bearing in mind the sensitivity of the ‘business critical data’ that is stored there. Back up plans should be drawn up to deal with this and should accommodate sensitive timing to minimise impact. Care should also be taken when dealing with a departing ‘customer’ as many tend to leave the equipment behind which causes uncertainty for the data centre manager who will be unsure if it can be re-used or not.  Document drafting should cover this from the outset. This can depend upon whether or not the customer has actually entered a collocation licence and had leased racking space or installed their own.

The immediate future sees increasing use of internet based back- up via Cloud based services which, once one is confident about data security issues, can allow for much greater employee participation and behavioural change, plus the usual benefit of reducing floor space usage for data equipment. You can anticipate data centre operators to be looking at using Cloud technology to meet this growing trend.

For further guidance on this area, TAP can direct you to industry experts.



Security Patrols – Can they be undertaken remotely?

If you work on an industrial estate or retail park, security of the common parts is often provided through regular manned patrols which are scheduled outside of the normal operating times of the estate or park.   In the current climate many managing agents are looking at ways of reducing the cost and one way maybe to replace these with a virtual patrol.

Virtual patrols operate through utilising a CCTV system that is linked via a wireless or broadband internet connection to a manned monitoring station where the cameras are regularly monitored. Typically a manned patrol can cost between £50 -£100 per patrol however there is a huge benefit as a security guard is capable of judging a situation and responding immediately to a potential issue, whereas a virtual patrol may cost as little as £3 - £6 per review.

A virtual patrol operates on the basis that the camera monitoring company can sweep the property using the images provided by the cameras at set and agreed times of the day.  The cameras can also be set up to provide alert alarms that would highlight a potential situation and bring an issue to the attention of the monitoring company.  With the images being provided through the internet, this allows the property manager to also view the site from any computer which aides the management of the property.

Using a virtual patrol can reduce the traditional routine, out of hour inspection cost, but there is an up front installation cost and broadband/wireless connectivity. Depending on the number of cameras a property manager may be looking at a capital expenditure amount above £10,000. This level of cost does depend on the number of cameras required to properly monitor the property.  The return on capitalfor such a project will depend on the number of years savings you apply to the project but based on 2 routine out of hours manned patrols per weekend at £60 per visit would result in an annual saving of £6,240.

As technology improves there will always be opportunities to offer a service in a different and potentially cheaper way so it is worth looking at what new innovations are out there.

May E Newsletter

Welcome to our fifth e newsletter of 2011.

This month we start with commentary on the eagerly awaited review of the Service Charge Code by a range of Industry heavyweights and follow this up with an article about other influential property leaders taking the DEC debate right to the PM’s door, in the pursuit of pressurising the Government to keep to its Green promises.

We then look at how local authority funding is likely to embrace the Community Infrastructure Levy, highlight changes in ownership and maintenance of our sewers and also question value-for –money with certain building projects.  We finish with our Q and A section which seeks to explain what’s out there…. in The Cloud.

Take a look at the 'New Code'

Launched and ready to take effect from the 1st October 2011 the revised Service Charge Code (‘New Code’) is here.  The ‘New Code’ has been drafted by a steering group which comprises representatives from a number of real estate groups including, the British Council of Offices, British Council of Shopping Centres, British Property Federation, British Retail Consortium, Corenet, Property Managers Association, and the Royal Institution of Chartered Surveyors.  You can take a look at this new document which we have uploaded to our Knowledge Centre but how does it differ?

The New Code has been revised after a consultation period managed by the RICS.  During this consultation the RICS received over 200 responses covering a variety of issues which they were able to review.

The ‘New Code’ primarily is concerned with the management and administration of service charges which remain the single largest area of concern for occupiers. This ‘New Code’ also extends to assisting those involved in drafting service charge clauses and directs them in using the right phrases and language.

The ‘New Code’ covers a number of core principles and these are set out in 26 points, the more relevant principles being: allocation and apportionment, certification, proportionality, anticipated future expenditure, environmental sustainability, and standard cost classifications.

In all situations the need for effective communication cannot be underestimated.  Occupiers have a need to understand how a service charge account is constructed as without it there’s an element of uncertainty and doubt over how the on-account and reconciliation sums are reached.  If doubt and mis-trust creep into a relationship then achieving a collaborative working partnership becomes much harder to deliver. The ‘New Code’ identifies the importance of good communication and timely responses and TAP’s clients do favour our proactive and strategic methods of liaising and supporting their occupiers. 
 
We would urge you to take a look at the ‘New Code’ and if you’re unsure about any of its contents then contact us where we can discuss any points you may have.



The Community Infrastructure Levy continues to gain support

Property consultancy, Drivers Jonas Deloitte, has published its 3rd annual review of the popularity of the Government’s proposed Community Infrastructure Levy (CIL) as a favoured method for Local Authorities to secure funding from development, and whilst this initiative was originally promoted by the Labour Government, it seems to be gaining momentum now that the Coalition administration has given backing to the scheme.

The results show that 68% of Authorities are now proposing to adopt the CIL, compared with only 20% in the 2009 survey, although you should be cautious with these figures as many Authorities still have other priorities ahead of adopting the CIL.

Julia Chowings of DJD comments, “Only a small number of authorities are advanced on CIL and the Government has recognised this in identifying them as Front Runner authorities.  We anticipate that their progress will be watched closely with many learning lessons and best practice from their experience.  It is apparent that many authorities are keen to share costs and resources by joining forces with neighbouring authorities to work on CIL.’’

So what is the CIL all about?  Briefly, the levy is designed to help pay for the infrastructure required to support new development and may sit alongside the more commonly known planning obligations (Section 106 agreements).  Charges will be based upon net additional sqm of floorspace in buildings that people normally use and will be calculated on evidence of the infrastructure needed, but in no way is the levy intended to be the main source of finance. Local authorities CAN apply the levy, but do not have to, however if they do then the infrastructure project must be set out on the authority’s website.  Other than money, the levy can be paid in kind (i.e. the acceptance of any land or existing buildings).

For further specific information on this important planning improvement, TAP would be delighted to direct you to an industry expert.


It hasn’t changed in 74 years but now costs will rise

The Government is proposing to change the ownership of sewers and lateral drainage systems with effect from the 1st October 2011.  The effect of this change will be to remove the uncertainty of who should repair and maintain the sewer system and make long term planning, in the light of changing climate conditions, easier.

Currently the majority of properties are connected to the sewer system from a private pipe or lateral drain and on the 1st October these will move across and become the responsibility of the statutory water authority.  In a written Ministerial Statement by James Paice on the transfer of 200,000kms of private drains it was said “Private sewers serve more than one property so ownership is shared and usually a large extent of the sewer will lie outside a property’s own boundary. Lateral drains serve one property but always lie outside the property’s boundary. Transfer provides the only comprehensive solution to a range of private sewer and lateral drain problems affecting householders. These include a lack of awareness of owners’ responsibilities and unwillingness or inability to co-ordinate or contribute to potentially high costs of maintenance and repair. It will bring simplification and clarity to owners, local authorities and sewerage companies, all of whom typically become involved when these problems arise.

Transfer will also significantly help address a lack of integrated management of the sewerage network as a whole, and provide much greater efficiency of effort, environmental stewardship and expenditure at a time when climate change impacts and housing growth may impose greater demands on urban drainage systems. Having a much greater proportion of the sewer network in the management of the water and sewerage companies means they will be able to plan maintenance and resolve problems more easily and comprehensively.”

This transfer of responsibility will lead to higher sewerage charges for the repair and maintenance of the extended system.  Early indications are that annual bills for residential properties, with shared sewers will increase by about £14 per annum.


Pressure increases on PM to deliver on promises for energy efficiency ratings

As a follow up to our comments in last month’s e Newsletter we draw further attention to the DEC debate with the news that some of the property industry’s heavy hitters have signed an open letter to the Prime Minister and Chris Huhne urging them to make DECs mandatory for the private sector.

The letter was initiated by the British Property Federation and the UK Green Building Council but attracted top level signatures from Hammerson, Land Securities, British Land and Legal and General, inter alia all of which is timed to escalate the debate such that A-G Energy ratings form part of the Energy Bill which is about to be debated in the House of Commons.

Following widespread criticism of EPCs and DECs only a few years ago by the property industry as yet another piece of EU Red Tape, it is ironic that the private sector is now calling for such mandatory
measures.  As the letter says, “Unfortunately, a voluntary approach to take-up in the private sector will not work, because without a level playing field there is a reputational risk for those businesses that voluntarily adopt certification and achieve poor ratings.’’

As Liz Peace of the BPF observes, “Savings of between 5 and 30% can be made through simple no and low cost changes to the way a building is managed and occupied.  A rating based on actual energy use will highlight these opportunities, which could otherwise remain hidden.’’

Additionally, Paul King of the UK Green Building Council adds, “It’s very simple - if you don’t know how much energy you are using, you cannot manage it.  We’ve simply no idea how our buildings, up and down the country, are actually performing, so mandatory A-G ratings are the crucial first step in helping businesses understand and reduce their energy use…Government needs to listen to the property industry - this is something that will cut carbon, cut energy bills and create new market opportunities in green technologies.’’

TAP remains of the opinion that mandatory DECs are on their way, and as we have already suggested, it can do little harm to start introducing measuring methodology now, in order to be able to assemble backdated usage data which will undoubtedly be requested as benchmarking information.

TAP can direct you to experts capable of assisting with this procedure.



Lowering costs may not always be the answer...

Trying to balance the cost of a service with the value it provides isn’t always easy.  In the current climate the tendering of contracts, to seek the lowest possible price, can occasionally undermine the standard being delivered and according to a recent survey undertaken by Lockton, an international insurance business, there is a suggestion that, when it comes to building works, cutting costs can increase project risk and reduce quality.

The survey interviewed a number of medium to large building contractors who primarily specialise in commercial fit-out and refurbishment projects.  The results found that many are busier than they have
been in the last 2 years but because of the tough economic conditions the quality of the projects being finished in the next 24 months will be compromised.  Why?  Because many believe ‘short-cuts’ have to be made to support the quicker delivery times and cheaper prices. 

A number of issues were cited as being of concern such as risk of injury to others, especially when the property is occupied, exposure to harmful substances (and in a few cases asbestos was referred to), solvency of the main contractor, lack of clarity in the client specification, and general pressure to have a fixed price contract.

Overall it seems that whilst people are looking to achieve lower prices for services they aren’t always thinking about the potential risks associated with ‘cutting corners’.  Remember, value for money isn’t always about having the cheapest contract in place.  Please speak to us if you feel concerned about how a contractor is performing or the potential risks associated with reducing the cost of a contract.


Question & Answer
With my new premises, should my IT infrastructure be based in The Cloud?

Establishing new business premises involves a vast range of choices and in an established business, many operational functions are taken for granted; however moving premises can throw up choice which may impact on working practices or floorspace usage.  The locality of the IT infrastructure need not be present within your workspace anymore and can be housed in what’s commonly known as ‘The Cloud’.  There is no clear definition of what is meant by this phrase but its common traits tend to be that it’s off-site, on-line and is paid for as part of a service with flexible costings based upon what you need and when.

One of the leading industry analysts, Gartner, describes it as ‘’A style of computing where massively scalable IT-enabled capabilities are delivered as a service to external customers using internet technologies’’.

Such an approach can lead to significant working efficiencies with staff all being able to access files and data from anywhere in the world, with negligible back-up, maintenance and storage worries and peace of mind from a business continuity perspective.  It is anticipated that costs maybe as little as 10% of your current on-site costs but this depends on your requirement.  Current examples that many are familiar with include Google G Mail, photo storage on Flickr and of course Facebook, all of which form part of a virtual desktop for individuals and their employers.

Topical language talks about the Public Cloud which refers to off-site data storage facilities that are usually provided by third parties on an ‘’as required’’ basis and the Private Cloud where there exists on-site pooling of available computing facilities, the latter of course still requiring maintenance, but resulting in reductions in equipment, energy consumption and the ability to decommission old equipment.

Typically, Cloud based projects are cheaper, quicker to deploy and offer greater flexibility.

Are there any drawbacks?  Understandably, there is a perceived loss of control with the Public Cloud and questions about data security, limited redress in the event that things do go wrong, with cancellation of the contract being almost the only sanction and the fact that residual systems (if you have them) will still need maintenance and transitional attention.  The first of these (data security/loss) is the most frequently raised however some would argue that with the regular automatic back-ups (and reputational pressures of the 3rd parties involved) data is more secure here than it might have been whilst resting on individuals under conventional operations.

For Private Clouds there still exist issues with the physical conditions prevailing in one’s building; namely, sufficient air-conditioning for equipment cooling, provision of multiple data cables and secure routes, access arrangements to data rooms, Landlord consents for new infrastructure, cabling, antennae, plus the whole issue of re-instatement when you move out again.

In summary, The Cloud (in whatever form) is both for now and the future and modern businesses need to constantly question the best route for themselves to allow for flexibility and mobility, but also to creat business efficiencies that were perhaps not possible when a company was originally formed.    
 

March E Newsletter

Welcome to our third e newsletter of 2011.

As the world focuses its eyes on the horrific events in Japan, the primary focus is understandably on the human toll. Needless to say, the horrendous destruction of property compounds the abject misery and shock for survivors. Whilst our industry can make every attempt to safeguard life and property, last week’s events give us a sobering reminder that almost all that we do is at the mercy of nature.

Our first article talks of a related, but, in context, relatively minor story about water damage to business and the approaches taken by the AIB and Government. We then look at 2 issues where the property overhead is being highlighted; increased litigation levels between Landlords and Tenants as the downturn brings to the fore the part that property plays as an overhead, and the lowering of the business rates relief threshold on empty property.

We then look again at the 2 most high profile Best Practice guides for the property industry and the adherence or not, to them; another VAT related story on Waste removal and then we conclude with a valuable reminder about the dangers and importance of asbestos and the need for strict compliance with the rules surrounding its management.


The price of keeping your head above water is going up.

Changes are afoot that may result in property insurance being harder to obtain after June 2013. It seems that the Association of British Insurers (ABI) and the Government have an agreement whereby the ABI will continue to offer cover for flood damage whilst the Government continues to support the cost of shoring up our flood defences. However this agreement expires in June 2013 and at the moment it will not be renewed; this is even more likely following Autumn’s Comprehensive Spending Review.

The summer flood of 2007 resulted in claims in excess of £3 billion, the Carlisle floods of 2005 had claims of £272 million and the Cumbrian floods of 2009 resulted in claims of £174 million. These claims are met whilst flood insurance remains available and if the Government removes their commitment it is likely premiums will rise and in some instances cover will no longer be offered. How will this affect the property industry?

The insurers are not just concerned by rivers breaking their banks or coastal erosion but also groundwater flooding, which is where the drainage system cannot cope with heavy rainfall or melting snow.

As a consequence both Landlords and Tenants will be affected by this potential drop in cover and/or increased premiums. For a landlord, not having cover may infringe their banking covenants or result in them needing to enhance their flood defences which in turn may result in consultation about any consequential loss. This will have an impact on the property’s valuation. For tenants it will result in business interruption as there are still properties that locate their generators and electrical switch rooms in the basement and, in many cases, ill-prepared businesses may not survive a major interruption.

What can be done to help Tenants prepare for such a hazard? The Environment Agency is beginning to work with utility providers, emergency services, insurers, transport and the retail sectors to develop flood warning products and services. Organisations will need to obtain a licence to use the data but it is hoped that using this information will enable responsive action to be taken either to assist in preventing damage from a flood in a known area or reacting to an imminent flood warning. Additionally, we suggest that you think about the critical components that may cause interruption to your business. We have previously mentioned that this could include emergency power generation, telecom racking and important filing and data which is stored below ground all of which would be critical to your business. Also look at staffing arrangements; often business interruption results from people not having access to their place of work. Here having a ‘cloud’ based IT network may assist in getting through such an issue.

We have looked for useful websites that may help you think about business continuity. London has a useful website that can assist businesses in thinking about preparing their business for such an event. We have uploaded a link on our site to both the London and Business Link website but if you’re not one of our subscribers click here for the link to London Prepared and here for Business Link.


Landlord and Tenant High Court disputes rise by 43% in one year

A recently published report by the legal information provider, Sweet and Maxwell (S&W) has shown a significant rise in the number of disputes reaching the High Court. The statistics show that in the recessionary years of 2008 and 2009 (the most recent figures) the numbers rose from 28 to 40 and this has been put down to a rise in the number of companies trying to reduce property overheads, especially in the methodology used in attempting to dispose of surplus property.

Whilst S&W point out that many disputes are resolved by negotiation and arbitration, the increasing High Court numbers illustrate the importance that is now being placed by both parties on property matters. On a wider scale, the High Court (Chancery Division) numbers show a dramatic rise from 2005,where only 2 cases are listed, then rising to 3 in 2006 and still only 5 in 2007.The huge % rises in the 2008 and 2009 numbers is clearly linked to the economic downturn.

Examples cited include sub-lettings that are attempted by Tenants at below the passing rent, which is in contravention of their Lease’s Alienation clause, and actions brought by Tenants where Service Charge contributions are in dispute.

The other key areas that have triggered Court actions lie in Break Clauses where Landlords will be particularly keen to see that Tenants have fully complied with all contractual terms and conditions; in Lease Assignments where a Landlord will be looking closely at the financial strength of the proposed Assignee; and in the area of Dilapidations (often contentious anyway) where Tenants may feel that Landlords are being excessive in their Claims and where Landlords believe that Tenants should adhere accurately to their reinstatement obligations.

Whilst more up to date figures are still not available, TAP can only assume that figures for 2010 will continue to evidence that upward trend as economic conditions dictate and prioritise a business’ overhead exposure.


Lowering the business rates relief threshold may impact quoting rents

April 1st sees a change to the rating relief available as the Government reduces the Rateable Value threshold level from £18,000 down to £2,600. From this date forward vacant properties that have benefitted from the higher threshold will now have to pay full business rates.

It is expected this will have the greatest impact on industrial space where rents are generally lower but offices and retail may still be impacted. It is unlikely to have an impact on Central London property where the business rateable values are more likely to be above this level but it will impact properties in poorer parts of the country.

Older buildings that have not been modernised and provide smaller units could be caught by this change. Start-up space or incubator units may well fall into this category and Landlords or occupiers who have surplus space may feel the financial pinch. If they are marketing vacant space whose Rateable Value is less than £18,000 they may now be faced with the dilemma of perhaps reducing their rents to encourage a letting. In the past, Landlords have sought to remove similar financial burdens by looking at demolishing the property. This may seem a drastic measure but in some instances this is by far the cheaper option. The Federation of Small Businesses believes this change will badly affect small landlords and leaseholders. Andrew Carter argues that April will push firms to the edge. He says “Business rates are in the top three of the largest overheads that a small business has to deal with. Add to that the higher chance that, because of the economic situation, businesses will have properties that are left empty. So stopping rates relief serves to penalise those businesses that are suffering most.”


Have you cracked The Codes?

In our earlier e Newsletters, we have made mention of both The Code for Leasing Business Premises in England and Wales 2007 and the 2006 RICS Code of Practice; Service Charges in Commercial Property, both of which came into force during 2007.

We still believe that, whilst both are still voluntary, they set helpful parameters within which leasehold participants should operate, so long as enough participants actually know of their existence.

Who then should be promoting them?

Whilst Tap’s full name might hint at some form of allegiance, we do in fact operate impartially and seek to offer Guidance to Landlords and Tenants alike, such that property-specific information is made available and, in the absence of any other body proactively drawing attention to both Codes, we are happy to keep referring to them.

The RICS has been mooted as the best professional body to promote and maintain/amend the codes and to date a couple of University surveys (Reading and Loughborough) have reported that widespread take up and attention has not been achieved, mainly as the industry has relied on surveyors, landlords and lawyers to employ the Code clauses only where it suits. Their voluntary nature plays a part in this, although the Service Charge Code appears to carry greater weight as it has been issued as an RICS guidance note and as of December last year the RICS submitted a new version of it for consultation which closed on January 21st,with results expected at the beginning of May.

The purpose of each Code is to act as a guide to best practice and depending upon whom a surveyor or lawyer is acting (Landlord or Tenant) there is bound to be varying opinion as to what this actually means in practice and hence there is always likely to be evolution and adaptation being advocated by the advisory side of the profession. However current feedback suggests that most surveyors find them helpful, but the reality is that market forces will play a large part in their adoption, namely that with a trend towards shorter leases and capped service charges there has been less of a need to fall back on best practice guides.

Certain property markets(notably London Offices) are showing signs of recovery as Tenant demand picks up which may lead to lengthening leases and a re-emergence of Rent Reviews, both of which could see a move towards closer equilibrium between Landlord and Tenant and hence a more likely application of one or both Codes.

The market will determine take up, and TAP will keep on promoting them.


Local Authorities no longer charge VAT on waste collection

After a recent policy review, HMRC now consider the provision of trade waste collection services to be non-business. However, as the sector includes collections from public organisations and also commercial companies, removing the VAT element for those in the public sector does raise questions about unfair competition. In spite of this observation HMRC does not feel this is the case.

The letter from HMRC to the local authorities summarises the position as: -

We have been fortunate enough to be provided with comprehensive data from DEFRA about the whole commercial waste collection market. Both Local Authorities and the private sector collect commercial waste, and so there is at least a theoretical possibility that relieving Local Authority commercial waste collection services from VAT could result in the ‘significant distortions’ of competition referred to in the second part of Article 13(1) of the Principal VAT Directive. However, having considered DEFRA’s data and CJEU precedent, we have concluded that, in this instance and under these particular circumstances, there is no evidence that such significant distortions would arise.

According to articles we have seen a few experts believe this may lead to the possibility of reclaiming VAT going back several years. Whilst TAP is not in a position to offer advice on this,it is fair to say that it may be a question for your accountant.


Question & Answer
As an employer what actions do I have to take if the building has asbestos?

Recent judgements have seen large compensation claims awarded to people suffering from asbestosis. Asbestos is a natural fibre which is mined predominantly in South Africa and can take the form of blue, brown and white material. Because of it’s ability to withstand heat, electricity and sound it has been useful in the construction of properties throughout world.

As it is no longer used in the construction of buildings and associated mechanical systems, properties built after 2000 are generally clear of any potential hazards. However, there is still a need to manage the material which remains present in those buildings constructed before 2000, as it can still be found in pipe lagging, floor tiles, roofing, soffits, pipe gaskets and so on. Consequently there’s still a need to manage the material and monitor its condition as any damage may cause loose fibres that can be detrimental to health. Components that contain asbestos are often referred to as ACM’s (Asbestos Containing Material). So what does an occupier have to do?

Under the Health & safety at Work Act 1974 and employer is required to ensure the working environment is safe to work in and the duty to manage asbestos is contained in Regulation 4 of the Control of Asbestos Regulations 2006. Unless a building is new or has been fully refurbished there is a strong possibility that asbestos may have been used in the construction of the property. If this is the case and you are part of a multi occupied building then request from the landlord or his agent a copy of the asbestos survey and management plan. This will indicate if the there is asbestos in the building and what regime the owner or manager has in place to monitor and manage the material. It is unlikely that this survey will have covered a Tenant’s demise and so there will be a need to undertake your own.

The survey may need to identify and test material and if necessary an element of intrusion and investigation will be required in be sure of its identification. By knowing where it is located enables an occupier to fulfil its obligation of monitoring and managing its condition by conducting reviews through regular inspections.

If you aren’t aware of your own situation please don’t delay in finding out.

Should you require any further information on this subject then please call us on 0800 865 44 50.

February e Newsletter

Welcome to our second e newsletter of 2011.

So much is happening in the property world that on occasion it is hard to decide which elements we should comment on. However here are a few which may be of interest.

We tackle a growing view that there may be a case to replace the open market rent review with a review linked to the Retail Price Index. We also take a look at draft proposals that allow local authorities to have a greater say in determining the level of business rates as a way of stimulating growth in the local community. How to introduce greater energy efficiency may allow an opening for the energy companies to fund such works. We also look at the increasing scarcity of water, the need for air conditioning inspections and finally the rules governing CCTV – not everyone seems to comply.


1. Is the Open Market Rent Review on the wane?

Recent reductions in the average length of lease terms, favourable tenant leasing conditions and the use of break clauses have led to increasing pressure on the traditional upwards only, open market review as a standard lease clause.

Traditionally, property is valued using a few primary factors one of which is the level of rent achievable. Where it is anticipated that rental levels will increase, due to open market forces of supply and demand, the value of an investment should appreciate and this is particularly important where the property is purchased with the use of bank finance.

However, owners who are free of debt restrictions are able to be less constrained in the way that they structure leases and the methods that they use to ‘review’ rent and, coupled with the introduction of the ‘Code’ (the Code for Leasing Business Premises in England and Wales) much greater emphasis is placed on looking for flexible alternatives.

So what are they and how widespread is this move away from the traditional method?

Looking at European models, they tend to favour Index-linked increases and in a low inflationary environment this may be acceptable to occupiers, but now, with inflation rising so rapidly one can imagine certain resistance in new lease negotiations. It must also be said that we are a long way from agreeing terms that would see a reduction in rent should inflation be negative.

So perhaps a fixed increase method is more equitable whereby both parties agree that the rent will rise to a pre-agreed figure after a certain amount of time, as a way for the Landlord to try to keep pace with inflationary pressures and rising rents and providing certainty for the occupier too. Some Landlords, however are not prepared to restrict themselves to such certainty and would rather speculate on rents rising, as has been forecast in Central London Office markets, for example, thereby trying to insist on regular open market reviews.

Turnover rents have often been popular in the Retail sector whereby the rent is linked to the trading success of the tenant, but again, in a downturn, this may not be great news for the landlord who owns retail centres with decreasing footfall and trading conditions, but it does mean the overall success of the Centre is shared with the landlord taking a keen interest in making the trading environment right.

As can be seen, timing and market conditions play an important role in rent review negotiations, but alongside this sits a trade-off in lease terms whereby concessions in some clauses (service charges/reinstatement/shared energy costs etc) might be appropriate for some parties dependent upon their view of the future; thus, the review of rent might not be the centre-stage issue that it once was.


2. Local Government Resource Review – It may affect you?

In January 2011 the Department for Communities and Local Government issued an Impact Assessment aligned to the Localism Bill concerning Discretionary Business Rate Discounts. We said in our November newsletter that we would follow events arising from the Localism Bill and this is one which may have an impact on business rates.

Currently business rates are collected locally, passed back to Central Government and then redistributed back to the local authorities as part funding of their services. The Government is looking at ways of allowing the local authorities the ability of influencing these business rates locally in an attempt to stimulate growth.

The ‘Barker Review of Land Use Planning’ identified that UK has some of the highest occupational costs in the world and that where industries are property dependant they will find it hard to compete and also stifle new business entry. The Government believes that by reducing this burden businesses may have more money to invest in their company’s expansion and so help to fuel a recovery in the economy. However, they do also accept that where rates may be lower this could assist in supporting increased rents and so the occupier may lose out on the benefit.

This would be a radical change to the current system and may see some businesses prosper as a result of the changes however as it’s just a discussion paper at the moment it may not happen, so let’s wait and see.


3. Leaving the cost of energy efficiency behind when you move...

The Energy Bill is making its progress through Parliament and one aspect which will grow in prominence is their ‘Green Deal’. As part of the Coalition Agreement’ the Government made a Commitment that: “through our ‘Green Deal’, we will encourage home energy efficiency improvements paid for by savings from energy bills”. It is intended that the Green Deal will also help to enable improved energy efficiency in non-domestic buildings. So, broadly how will this work?

The Green Deal Finance develops a new legal mechanism whereby the obligation to repay the costs of the energy efficiency measures is attached to the property and not the bill payer. This basis will enable the energy provider to develop various finance packages that can be utilised for projects that will improve a property’s energy efficiency. The over-riding principle is based on the assumption of making sufficient savings by introducing more efficient technology. So it is feasible that people can move out of a property and not only pass on the benefit of the works but also the costs involved on their installation. At the same time it is possible for a company to move into a property and inherit the costs associated with earlier works.

The dilemma a property owner has faced in the past is where do they get the finance from to undertake energy saving projects? We at TAP can see that this initiative from the Government will answer that question with one caveat; it must be able to show that enough savings can be achieved as a result of these improvements in the property.

This Green Deal will have provisions attached which may include:

The original and proposed assessments must be accurate to provide the comfort of knowing how much energy will be saved.

Only accredited measures can be installed.

Limits on how much finance is available.

The ability for the energy providers to collect the agreed repayment amounts

When is it hoped the Green Deal may begin? Well the literature on the subject suggests the second half of 2012 so let’s wait and see how this initiative develops.


4. Water; when will it become a scarce commodity?

The pressure on water resources is growing and according to the UN World Water Development Report, the quantity of water available could decrease by 30% in the next 20 years as demand increases. In the UK it is suggested that demand will be influenced by both climate change and population growth. With the population expected to increase to 65 million by 2018 (a rise of 5 million from 2008), this will lead to greater household use which will increase the strain on the available water. All this will lead to the need to have better water management both in houses and commercial premises.

Our ability to take the supply and availability of water for granted is no longer acceptable and Fiona Mannix, Associate Director of the RICS Land Group comments ‘Fresh water in the UK is now more precious than ever for its extensive use in essential activities.’ This view is supported by the Environment Agency (EA) who believes it is in part due to the increase in climate temperature and changes to the rainfall pattern. They say ‘Summers are likely to get hotter and drier, significantly increasing demand for water, and winters warmer and wetter’. Coupled with the change in the weather pattern whereby Britain is subjected to increased intensive rainfall which produces more frequent surface floods, the ability of water to infiltrate into vital ground stores is likely to decline.

With the ability to capture water efficiently ever decreasing, the water companies are having to try harder to extract this resource from the underground basins which in itself can cause further environmental damage. It won’t be long until the tables turn with the water companies looking to the consumer to be more prudent in how they use this vital resource. New developments, whether they are houses or commercial buildings, are already starting to incorporate water harvesting ideas such as using grey water for flushing toilets but more will be needed. This won’t be enough and before long there will be a need to retrofit water saving equipment to existing properties. TAP would advocate the need for managing agents to begin looking at ways of conserving the use of water in buildings as there is still time to reflect on the benefits of various projects in an attempt to meet this challenge head on. However, in the next decade the importance of water will become increasingly important in all of our everyday lives.


5. Air Conditioning Inspections – Are you too late?

You may have heard of the need for Energy Performance Certificates (EPCs) in both Commercial and Residential property, but the same EU Directive that brought you those also contained an obligation on the company who controls the technical functioning of Air-Conditioning systems to have them inspected by a certain deadline. Why? To make sure they function properly and, where possible, to reduce energy consumption.

For smaller systems, that deadline was January 4th 2011.

The key points to consider are:

Are you the company responsible for the system’s operation?

Is the system’s output over 12kW (i.e. the power required to air-condition an office or retail unit of approximately 1,500 sqft)

…if Yes to both then you should look to appoint an accredited assessor to inspect the system, with the intention of ensuring that it is functioning as efficiently as possible in a general drive towards maximised Energy Efficiency. The Assessor’s Report will indicate where the system can operate better.

You may not require a survey as in most multi-let buildings it will be the Landlord’s responsibility to ensure the central air-conditioning plant conforms to current legislation but if you have installed a separate stand-alone system, or occupy the entirety of a building, you are likely to be the responsible party.

For large systems, i.e. those with outputs greater than 250kW, the system should have been inspected by January 4th 2009; in both cases, Trading Standards Officers can and will check that Inspections have occurred, and fines will be applied for non-compliance.

For more information view our Guidance Note or alternatively contact us to discuss how you can arrange an inspection.


Question and Answer – CCTV; what are the rules for filming?

The UK is a heavy user of CCTV equipment and your image is probably captured and held on numerous systems as you go about your daily routine. Many of us have come to accept this ‘Big Brother’ society without question and recognise it’s a common means of keeping property and the environment safe. So what are the rules governing the operation of a CCTV system?

Helpfully the Information Commissioner’s Office has issued the CCTV Code of Practice (‘Code’). The ‘Code’ has been drafted to help ensure that good practice standards are adopted by those who operate CCTV systems and covers certain elements such as how to capture, store and when is it appropriate to release images to a third party. By doing so it overlaps with the requirements of the Data Protection Act 1998 which also plays a part in how information is managed.

For those who operate a CCTV system they must consider who is responsible for the control of the images and how it is used; they must notify the Information Commissioner’s Office that they are the data controller, and put in place a clear procedure on how the images should be handled and stored in practice.

Importantly an operator of a CCTV system must put in place sufficient signage which alerts a person they are in an area which is under CCTV surveillance. The signage has to be descriptive enough and mention who is operating the system, why it’s being used and who to contact should you wish to view the images.

The operator must also ensure that any information stored is done so in a way that maintains the integrity of the images. This then enables the information to be of a good standard should it be needed as evidence in court but there is no time scale for the length of time images must be held.

What everyone wants to know is can they view the images that have been recorded? Well, in general the answer is yes albeit an organisation can reject such a request if they believe there could be a risk to other people. Interestingly where you have had your image recorded, such as a shopping centre then those people have a right to have a copy of those images and these must be provided within 40 days of the request. The organisation can charge you for this service but the maximum charge is £10.


Should you want more information on this subject then please feel free to call us on 0800 865 44 50.

December e Newsletter

Editorial
This is our final e newsletter of 2010 and it brings to an end our 12 Q&A’s which highlighted some of the events found in the life of a commercial lease. Rest assured we will continue with this feature and focus on other areas that people may find of use.

It seems that 2011 will be as much a challenge as 2010 with the possible introduction of new accounting rules, certain changes to the uniform business rates and the beginning of ‘Localism’. We take a quick look at all of these in this issue. We also look at the Snow Code and a quick look at a recent survey of business sentiment. Many of the smaller firms are in better shape as a result of the recession which can’t be bad.

Finally, from all of us at TAP we would like to wish you all a very Merry Christmas and Happy New Year.

1. Lease Accounting; leases to face radical new approach

The International Accounting Standards Board (IASB) has recently published its ‘’Exposure Draft’’ (ED), something it has been working on since 2006, in an attempt to harmonise accounting practices.

If the proposals are adopted there are likely to be profound implications for lessee’s financial statements in the manner in which leases are accounted for on a Company’s Balance Sheet, plus additional burdens in regard to data collection, controls and processes. A further knock-on effect is likely to be in key company performance metrics, i.e. asset turnover ratios, return on capital and debt to equity ratios.

At high level, and for certain companies, it may even result in assessing the merits of owning real estate rather than leasing it, and even if leasing were continued, the likelihood is that shorter leases are favoured, as the accounting impact reduces in line with shorter lease terms.

So, what are the major changes that the IASB are proposing?

Fundamentally, all leases are to be accounted for on the balance sheet, showing that the ‘’right of use’’ creates an asset and the obligation to pay rent creates a liability. Current procedure has it that neither assets nor liabilities are recorded on the balance sheet, that Rent is an expense in the Profit and Loss Statement and that minimum future lease payments are disclosed. Rent and its escalation, will have to be accurately profiled throughout the lease term which may lead to increased reference to recognised indices (i.e. RPI) or by adopting fixed stepped increases, rather than open market rent reviews, in order to negate the need for forecasting, thus avoiding accounting variances.

Initially, there will be onerous data collection requirements, especially for businesses with multiple leased assets, which may well require external advisors to assist. Whilst timings of implementation may not take effect until January 2013, there will be a need to re-state prior year figures in which case prudent businesses would need to introduce preparation systems during the course of 2011, to cater for opening balances for accounting periods starting on or after 1st January 2012.

TAP is not qualified to advise on the intricate details of the proposals although, as a lessee, you are encouraged to contact your Accountant about the scope of the changes, but suffice to say that, if implemented, they are radical enough to effect business behaviour and will add, initially, a further layer of administration, and potential cost, to businesses operating under property leases.

2. Lease terms favour the landlord despite business sentiment being low

New evidence indicatesthat whilst SME's business confidence is still low, the length of newly agreed lease terms seems to be growing.  During 2009 lease lengths and incentives reached a low point but since then lease lengths are beginning to rise.

The figures of the recent survey were presented by Malcolm Fordsham, Director of Research at IPD. It was stated that new leases are now longest in the retail sector, averaging 14.8 years (excluding break clauses), followed by industrials on 12.2 years and offices at 8.8 years. At the same time incentives seem to be reducing, which is not surprising. Mr Fordsham commented “The average rent free period for offices is now about 15 months, but City offices averaged 27 months for the first half of 2010”. The size of fall can only be realised when compared to the length of rent free periods in Q2 & Q3 in 2009 where in some cases, there were rent free periods amounting to 46 months.

Lease renewals have also strengthened over the last 2 years with strong growth in the retail and office markets. However, the outlook may not be so rosy when you consider the recent SME survey conducted by QBE where it’s suggested 74% of UK SME’s expect it to be 2 years before they see a full economic recovery. Half of the SME’s questioned felt the 2.5% increase in vat will have a negative impact on their business and SME’s are unlikely to come to the aid of the unemployed public sector workers with only 17% expected to recruit during 2011.

Overall, although the business sentiment may be low, 54% felt their business was in better shape and more resilient as a result of the recession, so confidence maybe returning.

3. The rising cost of small vacant space........

The ability to benefit from a business rates relief in small vacant properties is likely to expire at the start of April 2011. The Rateable Value threshold was increased from £2,600 to £18,000 for the year 2010 – 2011 to help small occupiers overcome the financial burden of holding their space vacant.

With the threshold at £18,000 any vacant properties with a rateable value below this have been exempt from paying business rates. However, the Government now believes that returning the threshold back down to £2,600 will save them approximately £400 million per annum.

Liz Peace, Chief Executive of the British Property Federation said “If the government is pinning its hopes on a private sector led economic recovery then this is a damaging and retrograde step.

“Empty rates is a tax on hardship at the worst possible time. The majority of the properties affected by this announcement will be in areas that are already economically disadvantaged, and so this will be a further blow.”

The reinstatement of the £2,600 threshold will place a greater financial burden on those companies who currently benefit from the higher threshold relief however we understand there may be some active lobbying against this move which may lead the Government to water down the proposals. It will be interesting to see what may come of these changes especially as the Government has always stated the significance of an SME driven boost in the UK’s economic recovery.

4. Snow – Do we really need telling?

The unexpected snow fall this side of Christmas has caught many of us off guard but now it’s here, and with more predicted, do any of us know of the ‘Code’? The Government has issued a ‘Code’ which gives guidance on how to clear pavements and paths.

The Code can be found on http://www.direct.gov.uk/ although the home page isn’t that helpful and you may be better entering ‘Snow Code’ into a search engine, such as Google or Bing. This will take you straight to the right page.

The main elements the Government suggest that a considerate occupier should do are: -

1. Clear the snow early in the morning as this prevents it from becoming too compacted.
2. Use salt or sand and not water to melt the snow.
3. Be careful where the snow is moved to.

This website does not just contain information about how to clear your path; it also facilitates access to your local authority which enables you to review their policy on pavement and road gritting/clearing. So in the City of London, for example the roads and paths are cleared by the Cleansing Department!

On the face of it the information borders on common sense but as a portal to understand how your local authority approaches this problem, then it may be useful.

5. Localism – What does it mean?

The Government has this week issued its Essential Guide to the Localism Bill and describes how it proposes to make the shift of power from a centralised state to local communities.

More than half of all government spending in our cities, towns and counties is ring-fenced, which means that while it is spent locally, what it is spent on is dictated centrally. The sums of money spent in this way are huge, for example the total annual spend in Birmingham is £7.5 billion, in Kent it’s approximately £9 billion and in Greater Manchester and Warrington it’s £22 billion. Much of the money earmarked for expenditure in this way is spent on social security, health and education. This localism approach strongly suggests the money can be better spent under local control and so the Government has outlined 6 essential actions that will assist in delivering this change in direction: -

1. Lift the burden of bureaucracy

2. Empower communities to do things their way

3. Increase local control of public finances

4. Diversify the supply of public services by ending public sector monopolies

5. Open up Government to public scrutiny

6. Strengthen accountability to local people

For property, this will result in more local benefits arising from large developments, for example, changes to the "community infrastructure levy"( charges that local councils impose on developers). Now developers will be required to make contributions towards local infrastructure. With regard to the granting of planning permission more autonomy will be given to the local community who can, where the support is greater than 50%, push through planning proposals that may otherwise have been resisted in the past.

This Localism Bill is a complete change to Government’s existing approach and, as with substantial pieces of legislation, the devil will be in the detail but for the time being if it delivers savings by streamlining bureaucracy then it can only be beneficial to the country. Let’s wait and see.

Q and A – Relax; your lease has expired, or can you...?

So your lease is coming to an end and you’re moving on to new premises. What do you need to agree with your landlord? You certainly do not have to agree when your liability to pay rent, service charge, business rates and utility liabilities ends as these will be determined by your lease. Assuming you are not ‘holding over’ then your lease will expire in accordance with its express terms.

That leaves just one remaining element, Reinstatement and a potential dilapidations claim. To follow the prescribed route will be complicated as it will rely on a thorough knowledge of the various references to legislation and case law, such as the Landlord and Tenant Act 1927, in particular s18 (1), and if you are prepared to defend your position, and on occasions this is the right thing to do, then you will need to engage a competent surveyor to act on your behalf. A surveyor specialising in dilapidations will approach the situation by looking at the lease (tenant’s repairing covenant), consider the licences to alter and maybe Schedules of Condition, agent’s original particulars, rent deposit deeds and possibly any deeds of variation. This will help him build up knowledge of a tenant’s responsibilities to maintain and repair the premises that they have been using.

As a tenant you may not want to become embroiled with a discussion on all these and would much prefer to avoid a long and protracted negotiation. If that is the case many tenants opt for negotiating a settlement based on a priced schedule. This is by far the easiest way but you will need a priced schedule so you may have to wait for this to be formally served on you by your landlord. Timing may be an issue as the landlord can serve this on you in the last week of your term so you may wish to request the document earlier.

It is normal for this Schedule to include costs for the rent and service charge for the duration of the works as any remedial repairs will undoubtedly be undertaken after the lease has expired. Once received then you may wish to open up discussions on a settlement.

However, should you wish to undertake your own works then a tenant would be prudent to have these carried out during the period of the lease but remember this will involve liaising with the building’s management to obtain the right permissions and permits to work. Think about what impact this may have on your fellow occupants if you’re in a multi-occupied property as this may increase the works programme.

There are one or two aspects which are important to note about dilapidations; the future use of the property and do you, as a tenant, have an ability to undertake the works after the lease has concluded. The first aspect relates to whether the property is likely to be the subject of a substantial redevelopment and this may make the dilapidation claim void.

Landlords won’t always be able to secure a successful dilapidation claim if it can be shown the property is going to be the subject of a substantial refurbishment or development. Secondly, a tenant isn’t permitted (unless it’s agreed with their landlord) to carry out the works after the lease expiry.

For an occupier it can seem unwieldy when a lease expires and you receive a detailed Terminal Schedule of Dilapidations; so be prepared for when it arrives. Remember this can arrive at any time before the lease expires so it may be prudent to request this Schedule at least 6 months before expiry.

October E-Newsletter

As we go to print people are still digesting the effects of the Coalition's spending review. It's almost certain evryone will have to tighten their belts accordingly. But spending isn't the only issue that needs to be considered and this month we look at how the annual business rates increase is calculated, whether you need to inspect your air conditioning before the end of the year and review the findings of Lord Young's recent report on using common sense when dealing with Health and Safety. Furthermore it pays to have the right waste disposal strategy as we take a look at the first prosecution under the WEEE Regulations.

Finally we look at break options in our Q&A as it's not as easy as just serving a notice!

Retailers lead the charge towards a revised Business Rates calculation

The British Retail Consortium (BRC) has been at the forefront of lobbying the Government over the methodology used in establishing the new multiplier base. Traditionally, the system uses September’s RPI to form the basis of calculation for the following April’s increases and, coupled with last April’s Revaluation, the BRC says that this could see some retailers facing uplifts of 22%.

Whilst the BRC have appeared most vocal, the RPI figure will have implications for all commercial Rates payers and may come as an unexpected shock for business planning. Hence industry bodies are urging Ministers to consider other methods that are not so random. Stephen Robertson, Director General of the BRC says .....’’ Basing a whole year’s rates bills on one, almost random, month’s RPI makes no sense. The Government must switch to another way for next April and beyond.

Using the Consumer Price Index (CPI), as it does for pensions is one option. Or using the 12 month average RPI rate from October 2009 to September 2010, which would iron out inflation rate volatility.’’

The Rate that has been chosen is 4.6% (down from 4.7 in August) and is still considered to be too high for comfort, with commentators expressing concern that the speed of reduction from early year highs has been ‘’stubbornly ‘’ slow.

The coalition Government has its hands full with its Spending Review, and therefore a fine balance exists between spending cuts and tax adjustments to keep companies/retailers competitive, but if the RPI remains high and is the primary link benchmark in this annual recalculation, you can expect bodies like the BRC to increase the volume. For this next Rates year, however it looks too late.

Stop gassing around and take note?

ATTENTION... to those companies that install, maintain or service stationary refrigeration, airconditioning or heat-pump (RAC) equipment that contains or is designed to contain ‘’F gas’’ refrigerants …you have a legal obligation to hold either an interim or full Company Certificate. Should you want to review the list of F Gases (ie HFC's) visit the defra website (www.defra.gov.uk/fgas).

It is an offence not to hold an interim Certificate NOW and a Full one by July 2011 and enforcement will be pursued by your Local Authority and The Environment Agency, both of whom will have a range of options at their disposal to protect the environment. This reflects the fact that these refrigerants have a very high global warming potential, which can be up to 3000 times higher than CO2.

To clarify who is affected: Any organisation that directly employs engineers to install, maintain or service RAC equipment that contains or is designed to contain F Gas refrigerants. This includes RAC maintenance contractors and installers, including sole traders and RAC end users and facility managers employing their own qualified staff to carry out these activities.

Air Conditioning Inspections - Have you thought about this?

Air conditioning systems can account for 50% of the energy used in a building, and having it inspected by an Energy Assessor can improve efficiency, reduce operating costs which inturn lowers carbon emissions. Already the Energy Performance of Building Regulations (EPBD) are in place to impose an obligation on the operator to carry out an inspection on larger systems, and the an inspection on larger systems, and the obligation on the operator to carry out an inspection on larger systems, and the smaller (12kW) systems will need to have been inspected by the 4th January 2011. Do you need to undertake this inspection?  

Where you have to undertake such an assessment an assessor will be looking to: -

• Provide details of the system
• Highlight where it is possible to improveperformance and reduce carbon emissions, which may involve replacing the equipment

As with all regulations it is important to understand how an air conditioning system is defined. It is defined as: -

“a combination of all the components required to provide a form of air treatment in which the temperature is controlled or can be lowered, and includes systems which combine such air treatment with the control of ventilation, humidity and air cleanliness”.

The cooling capacity of an air conditioning ‘system’is further defined as “the sum of all individual cooling units under the control of one building owner or operator”, and so the criteria of 12kW may result from having multiple split units.

The need to inspect the larger air conditioning systems is already established and as such many of the property managers have access to the right people, qualified to assist you in understanding your requirements to have your air conditioning system checked. Alternatively speak to the Chartered Institute of Building Services Engineers who will be able to put you in touch with an approved assessor.

 
 
Will common sense prevail?
 

 

Is common sense finally going to prevail in the world we live in? If Lord Young and the Coalition government get their way then this will certainly be the case. According to Lord Young's recent report entitled 'Common Sense Common Safety', he would like to move away from the current compensation culture and endorse a culture of using common sense when reviewing non hazardous occupations.

The aim of the Report is to ' ...... free businesses from unnecessary bureaucratic burdens and the fear of having to pay out unjustified damages claims and legal fees. Above all it means applying common sense not just to compensation but to everyday decisions once again.’ His recommendations, should they be adopted, are only directed at non hazardous occupations and Lord Young freely recognises that the current system with tight procedures and processes has resulted in the lowest number of non-fatal accidents and the second lowest number of fatal accidents at work in Europe.

Lord Young identifies that this overall compensation culture has resulted in companies operating their health and safety policies in a climate of fear. The no win, no fee approach to making a claim against an employer and the role of the press in highlighting the absurd health and safety rules has identified the role Health and Safety Executive (HSE) and Local Authorities have to play in promoting common sense. The Report proposes: -

• The HSE develop downloadable checklists to reassure organisations operating in low hazard environments that they are meeting their legal obligations and managing risk as so far is reasonably practicable.
• Introduce qualification standards for health and safety consultants as currently this is not a requirement.
• Where local authorities are overzealous towards health and safety, the public should be allowed an appeal process and appropriate recompense.
• The insurance sector also pays a part where the requirement of meeting obligations can be too much of a burden for small businesses or voluntary organisations. Lord Young has asked the insurance sector to look at this point.

There are other aspects of the Report which touch on the voluntary, home working and educational sectors which we won’t touch on but it seems that the willingness to promote a common sense approach is there, it’s now finding the will and way to achieve what many of us have wanted for a long time.

Waste Electrical and Electrical Equipment Directive (WEEE).... First prosecution

A hairdressing supplies wholesaler has become the first producer to be prosecuted for failing to comply with the WEEE Directive. The Birmingham based company was prosecuted for non-compliance with packaging waste regulations and also for failing to register as a producer of electrical and electronic waste. The company was found guilty of 31 charges in total (at £650 each) amounting to £20,150 plus compensation of £7,135 for loss of registration fees and costs of £3,605.

Electrical and electronic waste is the UK’s fastest growing waste stream and the aim of the regulations is to reduce the amounts going to landfill and improve recovery and recycling rates. Since the original packaging regulations came into force back in 1997, they have helped in doubling the amount being recycled annually and the Environment Agency estimates that this amounts to some 6.6m tonnes being diverted from landfill to recycling each year. In general terms, the regulations demand that companies who handle packaging as manufacturers, pack fillers, sellers, importers or leasing companies are registered each year and provide evidence that they have and will continue to recycle packaging.

Break Options - Are they easy to exercise?

Incorporating break options in a lease is customary, especially in these austere times, as it provides the flexibility a tenant or landlord may require when occupying or owning a property. For a tenant is offers the chance to increase or decrease the space they occupy and for a landlord it affords the opportunity to redefine a building’s configuration to take advantage of changing occupier requirements. But if you have the chance to break a lease it is essential to exercise it in accordance with the prescribed dates and covenants of the lease. This is both for the landlord and tenant. Think about these steps before a notice is served.

• Think about your strategy. Once a notice is served it cannot be unilaterally withdrawn. Should you wish to serve a notice and then decide you wish to stay you will need the agreement of the other party.

• Is the break option personal? If this is the case it stays with the party that it was first attached to. If the lease has been assigned since this point it is unlikely the break option will be valid.

• Make sure you comply with the specific terms of the lease. Compliance is important if the serving of any notice depends on certain covenants being complied with. A prime example would be to have no arrears but it may be other elements such as keeping the property in good repair.

• Make sure you serve the notice on the right people. In the case The Hotgroup Ltd vs The Royal Bank of Scotland (as trustees of Schroder Exempt Property Unit Trust) 2010 the notice was not served on the property manager but merely the landlord. The Courts held that as this was a stipulation in the lease the notice had not been served properly. Make sure the notice is served on the right parties and if the lease is registered your solicitor should be able to establish who the registered parties are from the Land Registry.

The need to ensure compliance with the specific terms of the lease are noted and complied with cannot be underestimated if you wish the break to be valid. The principals apply to both the landlord and tenant, albeit most of the terms, which need complying with, seem to fall on the tenant more than the landlord.