Green Leases

The CRC Energy Efficiency Scheme (CRC) should by now be no stranger to those organisations falling within its wide ambit. The Government’s 2010 spending review dramatically changed the CRC into a source of public funds and seems to suggest further changes may follow but nevertheless it is something not to be ignored.

In the context of the landlord and tenant relationship the concept of a ‘green lease’ has been born and although their development was stunted by the recent economic troubles the introduction of CRC means the fight against climate change has become an unavoidable consideration, and potential source of dispute, for both landlords and tenants of commercial property.

Although the spending review has stripped CRC of its fundamental financial incentives for compliance it will continue to impact on both landlords and tenants. Although the direct liability under CRC for a property will depend on who is responsible for the energy supplies there are a multitude of issues thrown up in tenanted buildings that need to be considered, agreed and, ideally, documented.

The most pressing item for consideration will be who takes responsibility for the costs of complying with CRC. Many subsisting leases understandably fail to cater for CRC leaving the issue open for potential disputes. Where leases cannot be varied to do so, the parties may wish to consider an ancillary memorandum of understanding.

It is in the interests of both landlord and tenantto work together to improve the energy efficiency of a building and those entering new leases should give serious consideration to turning it ‘green’ and including provisions to deal with CRC. Buildings are thought to be responsible for almost 50% of the UK’s greenhouse gas emissions and the property industry is a primary target for the Government in their quest to meet climate change targets. Those within CRC’s immediate ambit need to take immediate steps to ensure they are ready and revised internal procedures and specialist advice are essential for all businesses and public sector bodies to avoid the potentially significant penalties for non-compliance.

To discuss Green Leases, including landlord and tenant responsibility, contact Robert Barnes.

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Thrings Solicitors

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