Monday, 01 Feb 2010
Impact of climate change on commercial buildings
Ambitious targets to reduce greenhouse gases by 42% as of 2020 mean that owners and occupiers of commercial buildings will shortly see a raft of new environmental regulations. Two pieces of legislation, the Climate Change Act 2008 and the Climate Change (Scotland) Act 2009, are responsible for these changes. The most important measures are summarised below.
energy performance assessments
Since January 2009, anyone wanting to sell or lease buildings has needed an energy performance certificate. The Scottish Government now intends to require every owner and occupier of commercial buildings to carry out an energy performance assessment and make any improvements identified in the assessment to enhance a building’s energy performance.
Exactly how the Scottish Government intends to enforce this new requirement is not yet clear, as the draft regulations have still to be published. In the short term, the Scottish Government may choose to make compliance voluntary. In the longer term, however, it is likely the Scottish Government will want to ensure compliance by, for instance, linking non-domestic rates for a commercial building with steps taken to improve energy efficiency – perhaps by offering discounts where such steps have been taken.
Tenants thinking of entering into new leases should pay close attention now to the energy performance of buildings and consider asking their landlords to pay towards these improvements.
more stringent building regulations
The Scottish Government hopes to achieve a 30% reduction in carbon emissions from all new buildings by introducing new building standards from October 2010. Whilst the detailed regulations have still to be drafted, land owners and developers should to pay close attention to them, given that the changes are likely to increase build costs.
Increased build costs will affect not just developers but also the market values of land and buildings. This has obvious implications not just for owners but also for anyone who holds options to buy land (and who may be able to argue that the market value of a site is reduced by the new regulations).
CRC
A new UK-wide emissions trading scheme, the Carbon Reduction Commitment Energy Efficiency Scheme, comes into effect in April 2010. Under this scheme, qualifying organisations (generally, large organisations such as government departments, local authorities, supermarkets and banks) will be required to purchase allowances based on the amount of emissions from buildings.
Whilst the scheme is intended to apply primarily to operators of businesses, landlords should watch to make sure they are not, inadvertently, caught by the scheme and required to buy the allowances instead of their tenants. Whether landlords have to pay may come down to the wording of individual leases.
climate change burdens
The 2009 Act gives the Scottish Government and conservation bodies the power to include new environmental restrictions, called “climate change burdens”, in title deeds to property. The aim is to force developers to meet stringent emission reduction targets by, in effect, preventing the sale of developed sites until these targets have been met. Fortunately, the limited categories of people permitted to create these new restrictions should limit their use.
Overall, these changes signal a profound change in the regulation of the commercial buildings. No owner or occupier can afford to ignore environmental regulation in the management of commercial buildings.
If you would like any further information or advice on these issues please contact Michael Dewar in our Property Team.