Law briefing
| Pages | 202-207 |
| Published date | 25 February 2014 |
| DOI | https://doi.org/10.1108/JPIF-12-2013-0067 |
| Date | 25 February 2014 |
| Author | Malcolm Dowden |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
Law briefing
Malcolm Dowden
Gwentian Consulting Limited, Reading, UK
Abstract
Purpose – This legal update examines the implications for commercial landlords of regulations
required to be made under Energy Act 2011, and to come into force by 1 April 2018. Under those
regulations, a landlord “may not let” commercial premises falling below a specified energy
performance rating (likely to be E). The sanction of market deprivation arguably represents a
significant shift in the balance between incentive and compulsion as the key policy tool adopted by the
UK Government in seeking to improve the energy performance of commercial buildings. The paper
aims to discuss these issues.
Design/methodology/approach – The paper sets out and reflects a practitioner’s concerns relating
to the proposed new sanction of market deprivation. It identifies and highlights practical difficulties
likely to be encountered when considering the interaction of the proposed regulations with existing
statute (e.g. Landlord and Tenant Act 1954) and contractual provisions such as tenant break clauses.
Findings – The prospect of being unable to let commercial premises that fall below a specified
energy efficiency rating must focus landlord attention on rights to enter to carry out improvement
works. The paper identifies a potentially significant trap for landlords in the model green lease clauses
issued by the Better Buildings Partnership where tenant consent is required.
Research limitations/implications – The paper does not reflect extensive or exhaustive academic
research. Consistently with its purpose a legal update, it identifies key issues likely to be encountered
by practitioners.
Practical implications – The principal practical implication is the need for landlords and their
professional advisors to consider as part of any current lease negotiations the need to secure rights of
entry for landlords to carry out improvement works where premises are at risk of falling below the
energy performance rating likely to be specified in regulations to be made under Energy Act 2011, s 49.
Originality/value – The paper reflects a practitioner’s views, developed through client matters and
also through designing and delivering professional training sessions, on the likely implications of the
requirement for regulations under Energy Act 2011.
Keywords Energy, Efficiency,Break option, Condition precedent,Market deprivation
Paper type General review
Energy Act 2011, s 49 marked a significant shift in government policy towards the energy
efficiency of commercial buildings. Arguably, it marked the point at which UK
Government policy moved from incentive to compulsion as the principal lever for improved
energy performance. The statutory language is stark: by 1 April 2018 the Secretary of State
must make regulations under which a landlord of privately rented commercial property
“may not let the property” if it falls below a specified energy rating, until the landlord has
complied with its obligation to make energy efficiency improvements.
The concept is similar to that adopted in European regulations relating to producer
responsibility: comply or suffer market deprivation.
Market reaction to the government’s shift in approach has been patchy. The
regulations required by Section 49 must be made by 1 April 2018 at the latest. They are
not currently in force, and so can very easily be ignored or dismissed as irrelevant in
lease negotiations. There is an election due in 2015, and so it might be assumed that the
regulations will never be made. However, that assumption cannot be safely made.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1463-578X.htm
Journal of Property Investment &
Finance
Vol. 32 No. 2, 2014
pp. 202-207
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/JPIF-12-2013-0067
JPIF
32,2
202
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