New regulations related to the European Energy Efficiency Directive are being brought into force, yet many landlords remain unaware of the changes. The 'Heat Network Regulations' will require all 'heat suppliers' to meet a deadline by the end of this month, and those who don't comply risk committing a criminal offence. How will commercial landlords be affected?
The Heat Network Regulations aim to cut energy wastage by changing the way that tenants are billed for their heating. The regulations apply to anyone who is a 'heat provider', and although many commercial property owners may not identify with this label, any landlord with more than one tenant in a communally heated building will fall into this category.
Heat providers are obliged to provide the National Measurement Office (NMO) with detailed information about their heating networks by 31st December 2015, and must install meters on their properties by 31st December 2016.
The new rules could benefit some tenants by reducing energy costs in the long run. However, responsibility for implementing the new system will fall on landlords, who will not derive any direct benefit from the changes. Failure to submit the required information by the deadline could result in the NMO imposing civil sanctions, including financial penalties. Total non-compliance with the regulations will be a criminal offence.
International law firm Pinsent Masons point out that although landlords bear a great deal of responsibility under the new regulations, owners will not have a statutory right to enter their properties – this could make compliance problematic if tenants refuse access.
David Howe, partner at Michelmores law firm, states that the rules are also likely to cause trouble when they contradict the contractual terms of tenants' leases. This could happen in cases where the lease provides that service charges are to be divided up in fixed percentages. No legal guidance has been given on this key point yet, and it remains unclear how any potential conflicts will be resolved.
There's no doubt that the new rules will place a burden on commercial landlords' time, but it seems likely that costly lease disputes could be on the horizon too. Commercial landlords can prepare for this eventuality by building a cash cushion and enlisting the help of ethical Enforcement Agents to eliminate commercial rent arrears.