Summary

There is increasing legislative and market pressure on the property industry to design, construct, use and demolish buildings in a way that both mitigates and adapts to climate change (e.g. by reducing carbon emissions and ensuring the ability of buildings to withstand extreme weather changes). This briefing outlines key mandatory and voluntary requirements for “green buildings” throughout their lifecycle and provides advice on practical compliance in order to avoid penalties and to maintain property value.

Introduction

A fundamental aim of UK planning policy is to achieve “sustainable development” (i.e. developing new buildings without compromising the environment). However, it is widely considered that both new and existing building developments are significantly failing to protect the natural environment and to mitigate and adapt to the effects of climate change (such as increased flooding and drought).

In particular, it is estimated that buildings (including their construction, use and demolition) are responsible for approximately 50% of the UK's total carbon dioxide (CO²) emissions, 50% of the UK’s water consumption, and 33% of landfill waste.

In order to address the seriousness of this issue, pressure is mounting on the building industry (in addition to the owners and occupiers of buildings) to do more to achieve sustainability throughout the lifecycle of a building from design to demolition.

This briefing note provides an overview of current (and future) law and policy, in addition to market practices, designed to achieve sustainable development in England and Wales.

Building design

Legal standards for sustainability

The construction of new commercial buildings in England and Wales is governed by the requirements of the Building Regulations 2000 (as amended) (the BR 2000). The BR 2000 set out minimum sustainability standards relating to, for example, energy and water efficiency.

Where new buildings fail to meet BR 2000 standards, a local authority may refuse to issue a completion certificate. In addition, the constructor could be served with an enforcement notice, issued with an injunction or prosecuted in the Magistrates’ Court (fines can reach up to £5,000 plus £50 per day for continued default).

It is anticipated that the sustainability standards set out under the BR 2000 will be tightened during 2010, particularly in relation to energy efficiency requirements. In addition, developers are likely to become subject to the Flood and Water Management Bill which (when enacted) will require new developments to be designed to prevent surface water run-off (e.g. through use of permeable surfaces).

Voluntary standards for sustainability

The British Research Establishment Environmental Assessment Method (BREEAM) is the main voluntary tool used for assessing the sustainability of new commercial buildings. BREEAM awards new commercial buildings a “rating” measuring their level of sustainability over and above the minimum requirements of the BR 2000.

A new alternative to BREEAM is the Green Rating (launched in June 2009 by AXA Real Estate Investment and ING Real estate (amongst others)). The Green Rating is an assessment of the energy efficiency of a building that looks at both the building materials and the waste generated by the building. The Green Rating is an international standard intended to allow companies with international property portfolios to accurately measure the efficiency of their sites.

It should also be noted that the Government is considering implementing a Code for Sustainable Non-Dwellings which could require new commercial buildings to be assessed (possibly using BREEAM) and benchmarked against competitors.

Action

Architects and developers - Ensure that you are aware of current and (to the extent possible) future legal requirements and voluntary standards which may affect the design of the development. Agree to a brief which is flexible enough to meet changing standards. Consider climate change adaptation and the building’s durability in order to avoid the building becoming obsolete.

The planning system

Local authority sustainability policy

Local planning authorities are required to exercise their planning powers “with the objective of contributing to the achievement of sustainable development” (Planning Act 2004) and to take Government Planning Policy Statements (PPSs) regarding sustainability into account when drafting development plans (documents setting out local planning policy according to which decisions on planning applications are made). For example, PPS 1 and 22 promote on-site or near-site renewable or low-carbon energy generation, and PPS 25 relates to the management of flood risk.

As such, developers are increasingly required to “front load” their planning applications with details (at the outline planning stage) of sustainability considerations. For example, information may be included on a proposed development’s siting with a view to reducing flood risk. Equally, an application may consider a development’s orientation in order to maximise sunlight to a particular elevation so as to utilise solar power or maximise passive heating.

Sustainable drainage

The Flood and Water Management Bill provides that construction works which have drainage implications (i.e. they have the potential to affect the ability of land to absorb rainwater) may not be commenced unless a drainage system for the work has been approved by the local planning authority (where an application for approval is made with a planning application) or the unitary authority or county council (where a free-standing application is made). In order to be approved, the drainage system will need to comply with the National Standards for sustainable drainage (to be produced by the Secretary of State).

Where approval is granted, the approving body may impose conditions on the drainage system’s construction and may require a non-performance bond. It is intended that, if the drainage system is not constructed to required standards, the approving body may use the bond to undertake the necessary works (if unused, the bond will be released when the drainage system is adopted).

Impermeable surfaces

In order to reduce the risk of surface water flooding (arising where water cannot sink into the ground quickly enough), the Government intends to introduce changes to planning legislation in April 2010 to restrict the use of impermeable urban surfaces such as concrete at business premises.

Environmental Impact Assessment (EIA)

Under the Town and Country Planning (EIA) (England and Wales) Regulations 1999, planning applications for major developments are required to be accompanied by an environmental statement detailing the likely impacts on the environment, and measures to be taken to mitigate those impacts. Should environmental impacts be identified (such as conservation issues), measures to mitigate those impacts may be included as a condition of granting planning permission.

Planning obligations (Section 106 Agreements)

Local authorities are increasingly negotiating sustainability standards for new developments as planning obligations under Section 106 Agreements. As such, it is seen to be increasingly expensive for developers to obtain planning permission.

Action

Developers - Liaise with the local planning authority to understand planning policy requirements (pursuant to the relevant PPSs and the FWM Bill). Budget for increased costs arising from compliance with sustainability standards. Such costs will either have to be borne by the developer or passed on to purchasers (which may affect the marketability of new developments in the current economic climate).

Land remediation

Developers intending to build property on a brownfield site will need to assess and (if necessary) remove all environmental and health risks before construction work can commence.

An environmental assessment should be carried out by an experienced technical environmental consultant. This assessment may involve an analysis of the air, soil, ground and surface waters through testing for a suite of previously identified contaminants and assessing risks. The assessment may conclude by identifying an appropriate remediation strategy to bring the site back into use. Remediation of a brownfield site should lead to the removal of all identified contaminants to render the site fit for its current use, or at the planning stage, fit for future use.

Site assessment and remediation can be an expensive, time consuming and complex process involving liaison with the relevant regulatory authorities. In addition, not all sites are deemed suitable for remediation, particularly if the costs may exceed the value of the land after development or there may be legacy issues.

Developers failing to consider land contamination may be issued with an enforcement notice by a local authority (or, in more serous cases, by the Environment Agency) requiring remediation. Failure to comply with the notice will be a criminal offence. In addition, where harm is caused to persons or to the environment as a result of the contamination, the developer may be held liable for damages.

Action

Developers - Carry out an environmental risk assessment prior to purchasing land for development. If taking on a brownfield site, budget for potential remediation costs.

Construction of new buildings

Waste management

Developers of property worth over £300,000 are required, under the Site Waste Management Regulations 2008, to prepare a Site Waste Management Plan (SWMP). The SWMP will record details of the construction project, estimate the types and quantities of waste that will be produced, and confirm the actual waste types generated and how they have been managed. Both the principal contractor and the land owner can be guilty of an offence if a project is started without a SWMP and fines can reach up to £50,000 on summary conviction, or an unlimited fine on conviction on indictment. Directors/officers may also, in certain circumstances, face personal liability.

Energy performance of buildings

The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 (EPB Regulations) require the energy efficiency of completed buildings (i.e. their heating and lighting services) to be assessed. The developer will then need to provide an Energy Performance Certificate (EPC) (rating the building’s energy efficiency) to the local authority building control.

Failure to obtain an EPC may result in a local authority issuing a Penalty Charge Notice. The level of penalty may be set between £500 and £5,000 for commercial buildings and at £200 for dwellings. In addition, until an EPC is obtained, construction professionals may be prevented from issuing a certificate of practical completion.

Action

Developers - Ensure that you understand the legal requirements and plan for compliance. If employing construction contractors, ensure that the contract includes necessary “green clauses” covering compliance with legal and voluntary standards (e.g. relating to building materials and site waste management). The standard form of contract used by the construction industry (drafted by the Joint Contracts Tribunal) has recently been amended to include sustainability clauses.

Ownership or occupation of existing buildings

Sale or rental of a property

Sellers and landlords of UK buildings are required by law to provide information on the building’s energy efficiency, as contained in an EPC (described above), to potential buyers or tenants. This is intended to provide potential buyers and tenants with the ability to make informed decisions on property investment based on a property’s green credentials.

In relation to leased property, the landlord and tenant may choose to enter into a “green lease” in order to agree that the property will be used in an energy efficient (sustainable) way. The Better Buildings Partnership has published a set of best practice recommendations and model form green lease clauses. The recommendations mainly concern energy efficiency, waste management, building operations, service charges, and obtaining BREEAM rating in major refurbishment programmes.

Action

Sellers and landlords - Provide an up to date EPC. Consider drafting green clauses into the lease documents.

Purchasers and Tenants - Obtain information on the buildings energy efficiency and sustainability rating (if possible). Conduct thorough due diligence to assess risks such as land contamination. For rented property, consider entering into a green lease with the landlord.

Property occupation and energy use - The Carbon Reduction Commitment Energy Efficiency Scheme (CRC)

From 1 April 2010, large property owners and occupiers in the commercial and public sector (which meet certain qualification criteria relating to electricity use and meterage) may become subject to the CRC - a mandatory cap and trade scheme for CO² emissions designed to reduce energy use and encourage investment in low carbon technology.

Under the CRC (from 2011 onwards) participants will be required to purchase sufficient “allowances” to cover their annual CO² emissions and, at the end of each compliance year (i.e. financial year), report on annual emissions and surrender used allowances. Following reporting, a league table will be published ranking participants in order of their energy efficiency. The money received from the sale of allowances will be recycled back to participants based on their league table ranking.

Action

Purchasers - Property purchasers which participate in the CRC (or may need to participate in the CRC in the future) may need to consider a building’s energy efficiency before entering into a contract to buy the land.

Occupiers - Organisations which are required to participate in the CRC may need to look for opportunities to improve energy efficiency in order to gain a better position on the league table.

Landlords and tenants - Landlords and tenants will need to consider who has responsibility for CRC participation in relation to a building’s energy use. Once this is established, they may need to consider burden and benefit sharing under the CRC within lease documentation.

Building managers - Contracts with managing agents may also need to contain covenants for the agent to monitor electricity use and to maintain energy efficiency standards.

Alteration and retrofit

The alteration (or extension) of a commercial building in England and Wales is governed by the BR 2000 (see the section on Building design above). Consequently, any building work will need to meet minimum sustainability standards covering energy efficiency and water (amongst others). In addition, those seeking to carry out the alteration or retrofit will need to consider whether planning permission is required.

Action

Developers - Consider whether planning permission will be needed. Consider BR 2000 compliance (in addition to compliance with voluntary standards and climate change adaptation measures (e.g. flood risk planning))

Demolition

Developers (and/or construction consultants) will need to apply for planning permission prior to demolishing a building. In addition, they will need to comply with the BR 2000 and Site Waste Management Regulations 2008 throughout the demolition process. Once demolition is completed, the potential exists for regeneration to begin again on site using all of the sustainability principles addressed in this briefing.

Action

Developers - Understand what is needed for legal compliance. Consider brown field regeneration and start the lifecycle of a building process again.