With not one but two deadlines looming for the Heat Network Regulations, time is running out for landlords to make their buildings compliant.
However, given recent events, many are understandably carefully considering expenditure; and with occupancy levels in many buildings still sitting at circa 20%, the regulations are simply not front of mind for many landlords.
In 2014, the regulations were implemented to improve energy use in commercial buildings with increased obligations for landlords that supply heating, cooling or hot water to tenants via a heat network, but they have largely failed to achieve this so far owing to the shortcomings of the assessment tool. In November 2020, changes to the regulations were introduced by way of implementation of an updated feasibility assessment tool, dictating that landlords must determine the ‘class’ of their building and complete a technical feasibility and cost-effectiveness assessment for those in ‘open class’ by 27 November 2021.
Although the final deadline for completing installations (such as heat meters and heat cost allocators) is not until 1 September 2022, plans must be put in place now. This means that landlords will need to make financial provision in the coming months in order to have the capital required to implement the relevant changes. However, at a time when competition in the market is fierce, increased capital investment or, subject to lease wording, potentially increased service charges, is less than ideal.
What’s more, global supply chain issues are compounding the problem, making it difficult for landlords to source the materials required to make changes to their buildings in line with regulations. Currently, lead times for materials for meter installation projects can be in excess of three months, potentially making the 1 September 2022 meter installation deadline difficult to achieve when juggling project planning and funding requirements.
It is conceivable that landlords, particularly in London, will fail to meet the September 2022 deadline and in doing so potentially face financial penalties. For some time, they have been experiencing a perfect storm caused by the pandemic, both in terms of financial and time resource. Although its intention to achieve more energy-efficiency through greater consumption transparency is commendable, the government’s demand to implement significant changes to buildings in the midst of a global pandemic was perhaps wishful thinking.
Now, it must acknowledge the resourcing challenges that the industry is facing and re-visit the deadlines. Landlords are committed to going greener but just need a little more time to get their houses in order post-pandemic. If we hope to inject life back into cities, the government needs to support its real estate a little more in the short term.
David North is a partner at Hartnell Taylor Cook