Energy Summit London
What was it all about?
After the success of our Energy Summit MK last year, we wanted to spread the word in the City so hosted our Energy Summit London at our Chancery Lane offices.
Martin Gibbons, Director of Vital Property Solutions, set the scene, stating the case for energy efficiency and explaining the requirements of “that F & G thing” - more formally known as “The Energy Efficiency Regulations 2015”. In a nutshell, if you’re a landlord and want to let property beyond April 2018, you need to ensure your property has an Energy Performance Certificate rating of “E” or above, in order to comply with the new regulations.
Isn’t 2018 a long way off?
If you’re like me, you might be wondering where 2016 went to, so before you know it, it’ll be 2018, so now’s the time to start thinking about the regulations, and with the best part of 20% of all commercial properties only having an “F” or “G” rating, you’d be well-advised to audit those EPCs in your property portfolio to assess where your stock falls short of the minimum energy efficiency rating (and this is where Martin’s company can help – small plug!).
Having to do work to improve the energy rating sounds expensive!
It doesn’t have to be. Martin relayed tales of how a small degree of expenditure – perhaps on better insulation, more sophisticated light and heat controls, or the replacement of lighting types – can have the desired effect – and you can have Martin carry out a draft EPC to work out the improvements in energy rating as a result of doing certain works so that you can focus – and spend money – on doing the right things which will actually help!
What impact do the regulations have on leases?
Us lawyers are still in the process of ‘feeling our way’ in terms of negotiations relating to the regulations but we’re certainly starting to see more energy related provisions being added to leases than we were about a year ago and there are more discussions at the negotiation stage.
At our event, Alex Miller, Principal in our Real Estate team, mentioned the idea of “dark green leases” which are really heavy in terms of the inclusion of energy and sustainability provisions and “light green leases” which take a lighter touch. We’ve also seen “memoranda of understanding” being used as an indication of intention to do the right thing while not requiring legal commitment.
It’s likely that an industry-accepted compromise will develop as time goes by but for the moment, landlords and tenants are often poles apart in what they’re trying to achieve: landlords are trying to knock their responsibilities on to their tenants and tenants are adamant that they won’t accept any such obligations! I suspect we’ll eventually find some middle ground which works well for both sides.
Alex also talked about some of the considerations landlords and tenants will have in mind when negotiating these provisions and some typical lease terms which are likely to be affected by the new regulations.
Do you feel like you’re behind?
Don’t worry! It was really interesting to hear from Lizzie Jones, Sustainability Manager at Savills, that, out of their massive client base, only about 10% of them are fully or on track to be fully prepared although there has been more interest and activity over the last 6 months as they begin to realise the implications. The reality is that landlords risk the loss of rental income if they’re not prepared and, in terms of investment in let properties, we’re already starting to see price chipping as a result of low energy ratings.
Please say there are some tax allowances…
It was nice to hear that the tax man might indeed be inclined to offer something! Rachel Nutt, Tax Partner at MacIntrye Hudson, told us of the tax benefits potentially available to those spending money on items to enhance the energy efficiency of their properties. Rachel’s key advice was that if you’re looking to spend money on improvements, plan ahead in terms of tax. In order words, seek the advice of a friendly tax advisor!
If the regulations just require the right EPC which lasts for 10 years, is my building actually as efficient as the certificate says?
Whilst the regulations focus on ensuring that the properties meet the energy efficiency rating as set out in Energy Performance Certificates, Dr Thomas Whiffen of the National Energy Foundation spoke of how the actual energy efficiency of a building might not quite marry up, particularly where the EPC is coming to the end of its 10 year life span. Thomas showed us a Voluntary Display Energy Certificate, or “VolDEC” which the NEF have developed, in partnership with Building Energy Solutions. Highlighting actual building energy performance, they provide a clear driver for improving building performance in commercial offices and have been trialed by Legal and General who are one of the frontrunners in terms of energy efficiency awareness.
As a general point, Thomas echoed Martin’s suggestion that improving energy efficiency is a bit of “no-brainer”, citing positives for everyone such as reduced occupational costs and a better working environment for tenants and their employees, enhanced market appeal amongst the environmentally conscious and faster re-lettings for landlords, and all-round gains for councils and the local area as a result of improving building stock in the area which in turn enhances the area as a business destination, increasing inward investment and generally enhancing the property market.
If you missed this event, don’t worry as we’re already talking about the next one, likely to be in the Autumn!