Danny Lafferty: Landlords need help on energy regulations

On 1 September new carbon and energy performance regulations for commercial property will come into effect which requires landlords to provide new owners and tenants with an Action Plan for Carbon and Energy Performance (ACEP). However, few people in the industry understand what is required.

Landlords could put in a new boiler instead of changing the lighting to reduce carbon footprints. Picture: PA

In Scotland all owners with properties 1,000sq m and above must comply with the new regulations to bring buildings up to improved standards. Landlords need to produce an action plan for the property and carry out the work stipulated within three and a half years. However there is a loophole that allows landlords to defer the action plan within the first 12 months so instead of an Energy Performance Certificate (EPC) on display, the owners of the building would display a temporary certificate which would need to be renewed annually.

There is flexibility within the new system to substitute alternative actions in the energy plan to reduce the building’s carbon footprint, for instance landlords could put in a new boiler instead of changing the lighting. So the whole process is open to negotiation as well as to potential abuse by unscrupulous landlords.

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The landlord could increase the service charge to cover some of the action plan work or look to recover improvement costs through the dilapidations process at the end of the lease.

This could make negotiations around a tenant’s exit from a building more complicated and/or protracted. If tenants don’t protect themselves via the lease they could find themselves funding upgrading works which will ultimately only benefit the landlord. It’s also worth highlighting that landlords are likely to view any improvements to a building’s performance as an opportunity to increase rental levels.

This means that undertaking valuation of a property or a pre-acquisition survey will be affected by the new legislation.

l Danny Lafferty, Senior Director, Building Consultancy