In this quarter’s edition Chris Norton and Simon Keen explain the Government’s proposed changes to the CRC Energy Efficiency Scheme whilst Dan Norris considers the practice of banks retaining title deeds.

Q: What’s happening to the CRC Energy Efficiency Scheme? I’ve heard that the Government has taken steps to simplify it. Is that true?

A: The CRC Scheme, designed to incentivise the uptake of cost-effective energy efficiency measures, has undergone a number of changes since its introduction in response to criticism of its complexity. In his Autumn Statement in December 2012, the Chancellor announced that the Scheme would be further reviewed to see if the administrative burden could be “significantly” reduced. If the review had concluded that this could not be achieved, then the Scheme could have been replaced with a straight-line tax but, instead, the Department of Energy & Climate Change has concluded that the Scheme can indeed be simplified and, on 5 March 2013, published a new draft Order that seeks to implement the simplifications.

Although the Government has opted not to replace the Scheme with the straight-line tax many had expected and some had hoped for, the measures to simplify the Scheme are a positive step forward. DECC believes that they will deliver “a 55% reduction in overall administrative costs”, equating to an estimated saving to CRC participants of £272m up to 2030.

In summary, the principal changes are:

  • a considerable reduction in the number of fuels included in the CRC Scheme, from 29 to two. It will now only cover emissions generated from the consumption of gas and electricity;
  • gas is only counted when used for “heating purposes” and there is also a new organisationwide 2% de minimis threshold for gas. So, if a participant’s gas consumption is below 2% of its electricity consumption in the first annual reporting year of a phase, it will not have to report on gas or purchase allowances for it;
  • all state-funded schools in England will now be exempted from participation in the CRC Scheme; and
  • the league table of CRC participants has been abolished.

The Government is expected to lay the draft Order before Parliament in the near future with a view to it coming into force on 1 June 2013. The majority of the simplified proposals will take effect at the start of the second phase in 2014/2015.

The Government still plans to review the effectiveness of the CRC Scheme in 2016. This review will consider whether the Scheme remains the appropriate policy to meet carbon reduction objectives and will consider alternative approaches.

Q: I am about to borrow some money against my property and the bank wants to take possession of the title deeds. Is this normal?

A: This remains normal practice although it has a limited purpose. Traditionally, before land ownership was registered at the Land Registry, the principal means of protecting a first legal charge was by taking custody of the title deeds and it is an old habit that dies hard. There is a practical reason for continuing the tradition though, even now that most land is registered (and must be on the grant of a legal mortgage). Taking possession of the deeds would normally include not only those that are already referred to on the registered title (deeds of easement, restrictive covenants etc.) but also documents which are not. In particular, these would include wayleaves, unregistered leasehold interests such as short term leases and licences and the counterparts of all occupational leases. Should the worst come to the worst and the bank ever need to enforce its security then it will be in a position to deal with the property in full knowledge of the rights and interests that affect it.

Q: Will I get the title documents back?

A: You should, as a matter of right, receive the title deeds back on expiry of the loan facility by repayment or refinancing. It has been noticed, though, that on some commercial loans, deeds storage with banks can be unreliable, not least because, for various reasons, the bank sometimes chooses not to take physical custody of the deeds but to leave them in the hands of their lawyers so that they can continue to refer to the deeds while undertaking asset management activity. The lawyers then hold the deeds to the bank’s order by an undertaking, and the bank finds it hard later in the process to work out where the deeds are as they do not have physical custody.

We therefore strongly recommend that with any document that is deposited with a bank by way of security at least one certified copy of every document should be taken. This will assist on any future application to court or to the Land Registry as a copy which has been certified by a lawyer to be a true and exact copy of the original might be accepted as being as good as the original.