Energy efficiency is a recurring theme in government legislation these days. Not so long ago, energy performance certificates (EPCs) were introduced and these are now compulsory on the sale or letting of almost all properties, residential or commercial. The Energy Act introduced a requirement that will have a major impact on the property industry when it comes into force in 2018. After that date, it will (with some exceptions) be an offence to let commercial property with an “F” or “G” energy rating. The full effect of this has yet to sink in amongst many in the industry. A third piece of legislation also deserves a mention. The title – the Heat Network (Metering and Billing) Regulations 2014 – may not set pulses racing, but read on if you are the landlord or a tenant of a multi-let building. These Regulations impose some significant burdens on landlords that should not be overlooked, not least because you might commit a criminal offence if you do.
The Regulations apply to “district heating” schemes, i.e. the supply of heating, cooling or hot water from a central plant to multiple buildings. These are common in large new residential developments. The Regulations also apply to “communal heating”, i.e. where the heating, cooling or hot water is supplied to more than one occupier in a single building (commercial or residential). Landlords of multi-let commercial buildings or blocks of flats where there is a central boiler or air conditioning system are, therefore, affected by these Regulations.
The first requirement of the Regulations is that the “heat supplier” (i.e. the landlord) must by no later than 31 December 2015 supply various technical information to the Secretary of State about the communal heating system. This includes the heating capacity of the system, the volume of heat generated and details of the metering equipment used. The information must be updated every four years.
The second requirement does not kick in until 31 December 2016 but landlords should plan ahead now. From that date, the landlord of a multi-let building who supplies heating, cooling or hot water must install meters to measure the consumption of that energy where it is “cost effective and technically feasible” to do so. If it is not cost effective to install meters, heat cost allocators and thermostatic radiator valves (on each radiator) must be installed instead (where they are cost effective and technically feasible). There is a complicated set of guidelines to determine what “cost effective and technically feasible” means. Broadly speaking, the projected energy savings over a ten year period must exceed the cost of installing the meters or heat cost allocators. Unfortunately, the Regulations do not tell us what happens if the tenant refuses to allow the landlord access to carry out these works, which the tenant might be entitled to do under the terms of its lease.
The third requirement relates to billing. When meters (or heat cost allocators) have been installed, the landlord must ensure that any bills that it sends to its tenants are based on that tenant’s actual consumption. There is an exemption if the cost to the landlord in providing such a bill exceeds £70 per tenant per year. There is, of course, the potential for a conflict if the tenant’s lease requires the tenant to pay on a different basis, e.g. by floor area, as many leases do. The Regulations do not explain how the landlord is supposed to deal with this conflict.
A landlord tempted to flout these Regulations would do well to reconsider. A breach of the Regulations may lead to the service of a compliance notice and a fine, and if the notice is not complied with the offender might face criminal prosecution and a further fine.