In anticipation of the start of the CRC Energy Efficiency Scheme (CRC) on 1 April 2010, a property industry working party intended to represent all interests in the property industry has issued a consultation on the treatment of the CRC in the context of landlord and tenant relationships. This follows on from the publication called 'The Carbon Reduction Commitment: A Guide for Landlords and Tenants' published by a group of industry bodies in June 2009.

The consultation is aimed at all property owners and occupiers. The primary purpose of the consultation is to explore whether a cross-industry consensus can be reached on how CRC costs should be apportioned between landlords and tenants in new leases.

The consultation asks, among other things:

  • whether, in principle, tenants should contribute towards CRC costs incurred by landlords in relation to energy used within the tenant's premises, or in the common parts
  • how such costs should be apportioned between different tenants  
  • whether tenants should provide landlords with the money to buy allowances in respect of carbon emissions, or whether landlords should buy the allowances and charge tenants retrospectively  
  • how recycling payments received by landlords under the scheme should be dealt with  
  • what should happen when either the landlord or the tenant changes  
  • if CRC costs are not passed on to tenants, how landlords and tenants could be encouraged to work together to reduce carbon emissions.  

If responses to the consultation suggest that a consensus is possible, it is proposed that a set of standard CRC clauses for leases could be produced. Since the CRC scheme operates at a group and portfolio-wide level, rather than in relation to individual buildings, an industry standard clause would have the advantage of consistency across the market and would reduce difficulties when landlords and tenants dispose of their interests. Standard drafting would save time, and keep costs down, when negotiating leases and (for landlords) when buying and selling buildings subject to existing leases. It would also make the ongoing management of a landlord's portfolio easier.

It is vital that as many views as possible are taken into account, both from landlords and tenants, and all those who may be affected across the property industry, including managing agents.

Please click here for details of how to respond to the consultation. The consultation closes on 5 February 2010.

Further guidance on the CRC can be found in our alerts: CRC - are you in or out? and Carbon Reduction Commitment - the basics, and in the CRC guide for landlords and tenants produced by the industry working party.