Climate change: what is on the horizon for real estate?
Pannone Corporate

2019 saw climate change making the headlines with ‘climate emergency’ being declared the word of the year, demonstrating that it is at the forefront of the public’s interest. As we move into 2020, there are changes in environmental legislation which are due to come into force and further proposed changes.

Energy Performance

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (“MEES Regulations”) mean that it is unlawful to grant a new tenancy of a property with an EPC rating of E (a sub-standard property), unless an exemption has been validly registered.

From 1 April 2020, it will be unlawful for landlords to continue to let a sub-standard domestic property, unless they have validly registered an exemption, or they have made all the relevant energy efficiency improvements for the property and the property remains sub-substandard. If a landlord breaches the MEES Regulations, they can be subject to fines and a publication penalty.

The government has published a consultation on amending the MEES Regulations to improve the energy performance of non-domestic private rented properties. The consultation sought opinions on two targets: either all non-domestic private rent properties are to achieve a minimum EPC rating of B by 1 April 2030 (where cost effective); or a minimum EPC rating of C (where cost effective). The government’s preference is for the ambitious target of a minimum EPC rating of B. The outcome of the consultation is awaited.

There are also intentions for the government to consult on increasing the minimum energy efficiency for domestic private rented properties.  

MEES provisions are becoming more common in leases and can impact on other aspects of the lease, such as rent review reinstatement and dilapidations.

Conservation Covenants

The government has proposed the introduction of conservation covenants in England to improve the natural environment for future generations. A conservation covenant is an agreement between a property owner and a body such as a conservation organisation (for example, the National Trust), local authority or government body. The covenant could contain positive or restrictive obligations for a conservation purpose. The covenant would be binding on future owners of the land and will last indefinitely, unless it provides for a shorter period or is with a tenant. There will be no restriction on the number of conservation covenants on one property.

Conservation covenants were included in the Environment Bill 2019, but it was not passed before the dissolution of Parliament. It is expected that the new Parliament will pick up the Environment Bill 2019.

The potential implications of conservation consents are not yet known. However, as with restrictive covenants, an onerous conservation covenant could affect the value of the land and the ability of the property owner to deal with or sell the property.

Electric Vehicle Charging Structure

In 2019, consultations were published by the Department for Transport looking at improving the charging infrastructure for electric vehicles.

The consultation included proposed amendments to the Building Regulations 2010 to include electric vehicle infrastructure requirements. The proposals would impact on developers by requiring the installation of charge points and/or cables (depending on whether the building is residential or non-residential) for new buildings and where existing buildings are undergoing major renovation (subject to exemptions). The outcome of the consultation is awaited.

Looking Ahead

As the public continue to demand action on climate change, it is likely that we will see further environmentally aware initiatives which could impact on real estate. 

For real estate advice, get in touch with the Pannone Corporate team on 0800 131 3355 or  complete our contact form.

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