I’ve been to various events recently which have educated me on a whole host of amazing – and sometimes incredibly technical – work going on in this sphere. From ‘digital twins’, which provide data on ‘what if’ scenarios to help companies decide which path to take in pursuit of energy goals, through to the analysis required for Scope 1, 2 and 3 reporting, designed to encourage businesses to reflect on how they can improve their carbon position in pursuit of the wider drive to net zero.
It has also been great to see the increase in B Corporations (or B Corps) – businesses committed to balancing people, planet and profit – and I’m delighted that we’re the first law firm in the South West to join those ranks.
Energy update for commercial properties
In the property world, the forthcoming change to the requirements around energy performance ratings and commercial leases is a particularly hot topic. While 2018 saw the introduction of minimum energy ratings, as shown by Energy Performance Certificates, for new leases, this April brings current leases within the scope of that requirement as well. As such, a landlord won’t be able to let or continue to let a commercial property with an energy rating below ‘E’. Given the fact that buildings account for about a third of all carbon emissions in the UK, and about two thirds of non-domestic property is rented, this new phase to the Regulations is significant.
Aside from the ‘green’ impact of the Regulations, we’re likely to see a financial impact, with investors increasingly looking to more sustainable assets attracting better rents and returns, and avoiding concerns around penalties for non-compliance with the Regulations.
Tenants are less likely to be attracted to inefficient premises, particularly given the increase in energy costs, and will be less likely to make long-term commitments. Whilst ‘green leases’ aren’t an entirely new thing, they sit in an evolving area of property law, and we’d expect to see them becoming more prevalent as companies start to see green clauses less as provisions covering annoying extra costs and more as integral to driving forward their own green agenda.
Advice if you’re a commercial property owner letting your premises:
- Assess your portfolios as a matter of urgency to ensure that you can comply with the Minimum Energy Regulations and avoid penalties;
- Be alive to the fact that the Government has confirmed its intention to raise the minimum rating to ‘C’ by 2027 and to ‘B’ by 2030, so implement the necessary plans to upgrade and refurbish as necessary with this in mind, and engage with your tenants with regard to the logistics around carrying out those works
- Consider the use of ‘green leases’ or ‘memoranda of agreement’ on environmental issues as a way in which you and your tenants can play your part in reducing the environmental impact of the property.
If you would like to discuss any of these issues, please contact firstname.lastname@example.org.
About the author:
Aimee Barrable is a partner in the commercial real estate team at Stephens Scown. With over 15 years’ experience, she has advised clients across a whole spectrum of industries on a wide range of property matters – with a particular specialism in acting for occupier and investment clients and with a particular interest in retail and leisure.