Property Law roundup
In this month’s issue we provide a briefing on proposals to require owners of existing buildings to make energy efficient improvements. We also include a number of relevant news items.
Welcome to the November issue of Anderson Strathern's Property Law roundup.
In this month’s issue we provide a briefing on proposals to require owners of existing buildings to make energy efficient improvements. We also include a number of relevant news items.
Please click on the links below for quick access to the undernoted items.
Briefing
Section 63 Climate Change (Scotland) Act 2009 and non domestic buildings
News items
Briefing
Section 63 Climate Change (Scotland) Act 2009 and non domestic buildings
Scotland’s Climate Change Act requires the Scottish Government to take steps to improve the energy performance of, and reduce greenhouse gas emissions from, non-domestic buildings. Section 63 of the 2009 Act compels the Scottish Ministers to bring in regulations that will force owners of inefficient and high emitting buildings to carry out improvements or undertake an energy performance improvement regime which will be monitored annually.
Building Standards Division is now consulting on the proposals that “eligible”, existing, non-domestic buildings should undergo an Assessment of Carbon and Energy Performance (ACEP) which comprises the production of (1) an Energy Performance Certificate (EPC); (2) a Recommendations Report; and (3) an Action Plan for the buildings.
The precise scope of buildings to be caught by the proposals remains to be determined in the course of the consultation. It is anticipated that listed buildings will not be included, nor will other buildings which can vouch compliance with 2002 building standards on energy performance. It is also proposed that there will be a size limit exemption which will be gradually removed over time - this is to mitigate the impact on SMEs. At the outset, all public and private buildings with a conditioned (heated and/or cooled) floor area greater than 1000m2 will be caught. It is likely that this floor extent requirement will come down to 500m2 before the end of 2013. As a broad brush estimate, most non-prime assets which have not been altered or renovated in the last ten years will be the focus of the eco drive.
The triggers for assessment and improvements will be sale, the grant of a lease or renewal of an existing lease of the building. These are, with the exception of lease renewal, the current triggers for production of EPCs. If a building has an EPC in place already, which is likely given their ten year life-span, only a Recommendations Report and Action Plan will be needed.
Since the market has now got to grips with EPCs, it will be the impact of Recommendations Report and Action Plan on the costs of ownership and leasing which needs to be taken into account. The Recommendations Report sets out advice on a number of improvement measures to the building (including some that may be more aspirational than cost effective) and also indicates the Operational Ratings (ORs) on energy performance and carbon emissions that must be reported on annually. The OR certificate which results is to be fixed to the building. The Action Plan sets out the timescale in which improvement works are to be undertaken. It will then be up to the owner of the building to decide whether to carry out the physical improvement measures or to follow an OR regime aimed at improving the energy performance and reducing CO2 emissions. This choice is recorded in the Action Plan (along with the timescale for the improvement measures and indefinitely for the OR regime). The owner may choose to delegate compliance with the task of the improvements or the OR regime to a tenant but, ultimately, the responsibility for compliance will rest with the owner.
The consultation suggests that the timescale for carrying out the improvements required should be three and a half years (they base this on the average lease length which is currently five and a half years - three years to do the work and six months to get any necessary consents). For implementing the OR regime, the timescale for producing and exhibiting the first operational rating will be one year from a trigger date. If a buyer acquires a property and does not like the measures agreed in the Action Plan, then it can vary the measures but it must ensure that the amended measures are undertaken and completed within the timescale set out in the original Action Plan.
Enforcement for non-compliance will be managed by local authorities and they will impose fines and be entitled to recover the costs of assessment and monitoring. To assist the authorities in their duties, there will be an online database set up for EPCs and ACEPs. Providers will lodge the documents online with the owners bearing the costs of registration.
Comment
The proposals clearly threaten to impact on the “non-prime” letting market- the secondary or tertiary stock. Arguably, rents for such properties could be further depressed than they are in the current climate if and when the measures become law. The introduction of the Green Deal may offer the landlords, in this market, a more cost effective route to improve the environmental performance of their building stock and improve the letting potential of their assets. Under a Green Deal a landlord can improve the energy efficiency of his building with no up front costs and his tenant can pay for the measures through his energy bill - the tenant benefiting from the reduction in occupier energy costs. If you have a Green Deal in place, then you are exempt from the ACEP regime proposed and it will be the energy user (tenant) who pays for the improvements via their utilities bill under a Green Deal Plan.
What may be the real issue for landlords of older stock buildings is whether or not their exiting leases can support a fair allocation of the costs involved between the passive owner and the occupying user or emitter. It may well be the case that a negotiated position will need to be reached since the costs involved may not have been in the reasonable contemplation of the parties to the lease contract from the start. Landlords, as owners must always bear in mind that responsibility for compliance with ACEP measures rests with them and therefore any enforcement by local authorities will be against them.
The consultation is open for comment until 20 January 2012 and full details are available on the Scottish Government website accessible here. If you would like further detail, please get in touch with Dawn Henderson, partner in our Commercial Real Estate department.
News items
The Scottish Ministers have now made the Town and Country Planning (General Permitted Development) (Scotland) Amendment Order 2011 which came into force on 21 November 2011.
The effect of Article 2 of the Order is to remove the requirement for "prior notification" under Class 70 of the Town and Country Planning (General Permitted Development) (Scotland) Order 1992 (as amended) for almost all demolition with the exception of demolition of a "qualifying building" and "excluded demolition". A "qualifying building" includes dwellinghouses or a building containing a flat or a building having a mutual wall with or main wall adjoining a dwellinghouse or a building containing a flat. What amounts to "excluded demolition" continues to be regulated by the definition contained in the 1992 Order.
Alastair McKie, partner and accredited specialist in Planning Law at Anderson Strathern comments:
"Developers need to be aware that permitted development rights to demolish buildings do not apply: (1) to any building which has been rendered unsafe and uninhabitable by action or inaction and where temporary support measures are impracticable; (2) where that development requires an Environmental Impact Assessment; (3) if there is a breach of a condition or limitation of planning permission or deemed planning permission; (4) it relates to an unlawful use; and (5) where permitted development rights have been removed by a Direction. Permitted development rights are also qualified if the development is likely to have significant effect on a European site under the Habitat Regulations 1994. There are in addition further statutory controls on the demolition of certain buildings (e.g. listed buildings, buildings in conservation areas and scheduled ancient monuments)."
Please get in touch with Alastair if you would like any further advice and assistance.
The Environment Agency has published the Performance League Table which shows the performance of participants under the Carbon Reduction Commitment Energy Efficiency Scheme (the CRC). The table ranks 2,000 organisations according to how they manage their energy use.
According to the table, 60% of participants have taken steps to improve their energy management, including installing smart meters or gaining good energy management certification (e.g. from the Carbon Trust). However 40% of organisations came in at the bottom of the table with a score of zero – with the Department of Energy and Climate stating those firms haven’t taken any action to improve energy use.
The CRC league table is available to view on the Department of Energy and Climate’s website, accessible here.
This bulletin is for general information only and does not constitute legal, investment or other professional advice. Please contact us should you require advice on any particular legal issue. Anderson Strathern LLP accepts no responsibility for any loss that may arise if reliance is placed on any information or opinions expressed in this bulletin.
