What we learnt: Energy Summit MK
What was it all about?
The evening opened with Martin Gibbons, Director of Vital Property Solutions, setting the scene and stating the case for energy efficiency. Martin explained the key aspects of “that F & G thing” also known as “The Energy Efficiency Regulations 2015” – and the relevant requirements. In a nutshell, if you want to let property beyond April 2018, you need to ensure your property has an Energy Performance Certificate rating of “E” or above.
Isn’t 2018 a long way off?
It might seem so, but now’s the time to start thinking about the regulations, and with the best part of 20% of all commercial properties only having an “F” or “G” rating, you’d be well-advised to audit those EPCs in your property portfolio to assess where your stock falls short of the minimum energy efficiency rating (and this is where Martin’s company can help – small plug!).
Having to do work to improve the energy rating sounds expensive!
It doesn’t have to be and it’s not all about using renewable energy. Martin relayed tales of how a small degree of expenditure – perhaps on better insulation, more sophisticated light and heat controls, or the replacement of lighting types – can have the desired effect.
What impact do the regulations have on leases?
As we’re still a little way off the minimum energy requirements coming into effect, us lawyer types are still in the process of ‘feeling our way’ in terms of negotiations relating to the regulations. It’s likely that an industry-accepted compromise will develop as time goes by but for the moment, landlords and tenants are poles apart: landlords are trying to knock their responsibilities on to their tenants and tenants are adamant that they won’t accept any such obligations!
At our event, Alex Miller, a Principal in our Real Estate team, picked out just some of the lease terms which could typically be affected:
- Rent reviews may start to assume a certain level of energy rating;
- We might see landlords seeking to recover energy enhancement costs through the service charges, something which could be particularly disproportionate in a short term lease where the tenant enjoys little or only temporary benefit;
- Landlords may be less amenable to tenants’ fit-out and refurbishment programmes, fearing the impact on energy efficiency; and
- Tenants need to remember that they may become landlords should they need to sublet in the future, so would be caught by the obligation to ensure minimum energy ratings
Please say there are some tax allowances…
It was nice to hear that the tax man might indeed be inclined to offer something! Rachel Nutt, Tax Partner at MacIntrye Hudson, told us of the tax benefits potentially available to those spending money on items to enhance the energy efficiency of their properties, including the 100% first year allowances on energy saving efficient items and the less well-known ‘Business Premises Renovation Allowances” for capital expenditure on the renovation or conversion of business premises in a designated disadvantaged area. Rachel’s key advice was that if you’re looking to spend money on improvements, plan ahead in terms of tax. In order words, seek the advice of a friendly tax advisor!
We saw BMWs on your courtyard - What was that about?
Rachel’s presentation was followed by a bit of a commercial break when Andy Payne of Wollaston BMW extolled the virtues of BMW’s i-series. With energy efficiency and sustainability in mind throughout the build process, BMW i stands for visionary vehicles with inspiring design and we certainly had a better idea of the impressive capabilities of the i3 and i8 by the end of the evening. I quite enjoyed trying the i8 out for size (stationary, I hasten to add) and we hope our lucky friend who won the i3 for the weekend, enjoys the ride!
What’s a “VolDEC”?
Dr Kerry Mashford, Chief Executive of the National Energy Foundation, showed us an example of a Voluntary Display Energy Certificate, or “VolDEC”, voluntary certificates which the NEF have developed, in partnership with Phil Jones of Building Energy Solutions, as an appropriate means of measuring and highlighting the energy performance of commercial office buildings in a relatively simple and consistent way. They use the energy grading in ECON19 (Energy Consumption Guide for Offices) to provide composite landlord and tenant benchmarks for different building scenarios and, given that composition, a building owner or occupier can track their steady progress, in connection with the parts of the building they control, through the various levels within a “G” rating, rather than finding themselves simply “stuck” at a G rating with no real indicator to show the improvements they’ve made. Highlighting building energy performance and providing a clear driver for improving building performance in commercial offices, VolDECs have been trialled by Legal and General and are now being developed for other sectors. Kerry echoed Martin’s suggestion that improving energy efficiency is a bit of “no-brainer”, citing positives such as reduced occupational costs, enhanced market appeal amongst the environmentally conscious and the beneficial impact on occupiers’ health and productivity – which can improve staff recruitment and retention.
“Is this a win, win, win opportunity for Milton Keynes?”
Kerry ended her presentation by pondering whether local businesses would get involved in some sort of city-wide energy-related programme which, whilst improving the energy efficiency of our buildings and resulting in the positive benefits that would bring, also further reflects MK as an impressive business destination, increasing inward investment, enhancing the local property market and generally promoting MK as a great place to be.
"I was pleased to see so many familiar faces at our event, looking to soak up some information on the new energy regulations. Energy efficiency and sustainability is a “hot” topic, if you’ll excuse the pun, and even if minimum energy requirements weren’t being imposed, there’s a certainly a good case for implementing changes to reduce the environmental impact of our buildings."
Stephen Kay, Head of Real Estate, EMW
Are you taking the Summit on the road?
We plan to run it again in our Chancery Lane office. Watch this space for further information!