Carbon fog fails to clear
Remember back in April we blogged about the Carbon Reduction Commitment (CRC Energy Efficiency Scheme), the thorny issue of the position between landlords and tenants, and how the results of the British Property Federation’s working party on the subject were eagerly awaited? Well, they’re in. But they don’t show any consensus on the key issues – even the landlords that participated can’t agree among themselves. So a standard CRC lease clause is some way off.
The BPF says the majority of respondents from across the property industry believed that tenants in buildings belonging to landlord participants should contribute in some way towards the cost of CRC participation, but “opinions varied as to how far they should do so”. There was no agreement on whether administrative costs should be borne by the landlord as a “head office cost”, since the CRC imposes obligations on the landlord’s corporate group.
There were concerns, among the minority who believed tenants should not contribute at all to the landlord’s costs in participating in the CRC, that to do so would have negative effects on the liquidity of the property market. This could distort rents, as tenants might not be willing to furnish market rents for leases that contained extra obligations arising from the landlord’s participation in the CRC. There were also clear differences of opinion about alternative ways to meet the costs of CRC participation, such as higher rents per sq ft.
Most respondents did agree, however, that the costs and benefits of the scheme to individual buildings and tenants should be determined by reference to actual energy use. And if the costs are not passed on to tenants, respondents agreed that the volatility of energy prices and corporate social responsibility issues would be incentives for landlords and tenants to work together on energy efficiency – carbon emissions reduction after all is the aim of the scheme.
The BPF has concluded that “it seems, therefore, inevitable that one single, industry-standard, CRC lease clause is unachievable in the short term,” but still sees merit in highlighting particular approaches that landlords may decide to follow. Its Industry Working Party is thus working on a second edition of “The Carbon Reduction Commitment: A Guide for Landlords and Tenants”, and this is expected to be issued later this month.
