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Avoiding the Blues with Green Credentials

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Adrian Tattersley, Lawyer with Keeble Hawson's Commercial Property Department in Leeds, considers the potential impact of adopting carbon efficient measures within the framework of existing legal documents.

Landlords need to consider carefully how carbon efficient measures, mandatory or voluntary, impact on an investment governed by legal documents drafted prior to the current cultural shift towards being more environmentally aware. With the right forethought, consideration and legal advice, landlords can avoid potential complications or costs and instead establish themselves as environmentally progressive.

Consideration should be given to the recovery of service charges before implementing carbon efficient measures, whether you are refurbishing a building, repairing or maintaining common parts, or generally providing lighting, heating and other services. If not, you run the risk that those costs may not be recoverable from tenants; tenants may challenge relevant service charge items claiming them to be 'improvements' that fall outside the service charge provisions rather than items of repair or maintenance. This challenge may even extend to carbon efficient measures adopted by building regulations that now require 10% of the project budget to be spent on 'consequential improvements' to the energy performance of a building in certain cases.

Similarly, Landlords should consider carefully how to address carbon efficient measures as part of tenants alterations when negotiating a Lease or Licence for Alterations. A general provision restricting alterations that 'do not detrimentally affect the carbon efficiency' of premises may, effectively, prohibit alterations! Many alterations inevitably lead to an increase in carbon emissions. A tenant may wish to adopt carbon efficient measures in his project to minimise the increase. However, the alterations will nonetheless generate an increase and therefore by their very nature 'detrimentally affect carbon efficiency'.

Similarly, tenants' 'buy in' to carbon efficiency may need to be carefully negotiated, since tenants may view the imposition of a condition to adopt carbon efficient measures as the Landlord unreasonably withholding consent.

Adopting carbon efficient measures is a feature to consider holistically and not in isolation. Such measures may hold hidden implications for the ongoing management of let premises and the building, influencing apparently harmless and inconsequential provisions within an existing Lease.

For example, a requirement for natural light (to reduce artificial carbon generating light) may conflict with a provision to create new openings within premises. Equally, new energy efficient measures and new generating equipment may require adaptation of other parts of a building affecting other tenants and for which there may be no legal rights or obligations facilitating the measures.

Having adopted carbon efficient standards there is also the need to consider ongoing management. This may be in the form of Landlords adopting, as part of good estate management, the 'Landlord's Energy Statement' and requiring a tenants covenant to undertake 'Tenants Energy Reviews' (as promoted by the British Property Federation).

'Green credentials' are here to stay and, over time, new provisions, management practices and, maybe, 'green leases' will appear. Meanwhile, consideration of new measures against existing provisions can only serve to preserve not only the planet but also the continuing Landlord and tenant commercial relationship.

For further information contact Adrian Tattersley by email: adriantattersley@keeblehawson.co.uk or direct telephone: 0113 3993439.

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