Landlords And Tenants Have Less Than Two Years Before New Rules Apply

By David Shirt

Landlords and tenants of commercial property have less than two years to prepare for major legal changes which will lead to the ban of a substance commonly used in a number of air conditioning units and refrigeration systems, a real estate specialist has warned.

The use of the refrigerant R22 and others hydrochlorofluorocarbons (HCFCs), which are commonly used in such appliances, will be made illegal under European Union regulations and the change will come into force in England and Wales through environmental protection legislation at the start of 2015.

Now, Irwin Mitchell’s specialist Real Estate team are calling on landlords and tenants to ensure they understand the importance of the changes and take steps to avoid financial penalties by:

• Identifying all of their systems containing HCFCs such as R22
• Considering the options available to them in terms of converting, replacing and maintaining existing systems that use such substances
• Planning ahead to ensure they have properly budgeted and implemented the regulations before the January 2015 deadline

Christopher Perrin, a legal expert who advises on real estate at the national law firm’s Manchester office, said: “From January 2015, the use of HCFCs like R22 will be illegal. To be clear, “use” in this context means the utilisation of controlled substances during the production, maintenance or servicing (including refilling) of products and equipment.

"There are three clear options available to those who have to deal with this issue. First, they could look to replace the units which use HCFCs. Whilst this may prove expensive in the short term it is likely to mean the introduction of more energy efficient systems.

"Secondly, it may be possible to convert existing systems to use safe substances. This will be cheaper than a full replacement although industry experts consider that converted systems may be less energy efficient and this option is therefore more suited to the short-term.

"Finally, businesses may decide to nothing as it will still be legal to operate such systems provided that there is no maintenance or servicing (including refilling) that involves breaking into the refrigerant circuits. This final option will only really be a possibility where the system is in extremely good condition and its use is not business critical.”

Perrin added that another key step in dealing with the issue is for the parties to determine who is liable to address the issue – the landlord or the tenant.

He explained: “Landlords and tenants must first become clear on their individual responsibilities in this area, although it is likely to sit with the former if it involves a multi-tenanted building.

"In that case, landlords would need to carefully review their existing leases to see if they can recover the cost of any action through the service charge regime. They must also ensure that they follow the service charge regime carefully to avoid dispute and, as it is likely to be large item of expenditure, the best practice will be to consult with tenants and plan well in advance of the ban.

"For tenants, air conditioning may well play a key part in future lease negotiations. For example, if a tenant is taking a new lease of a building in which the systems currently use HCFCs will they demand that the landlord replaces the system at its own cost or look to specifically exclude such costs from the service charge going forward?

"There is clearly plenty to think about, which is why we are urging both landlords and tenants to ensure they give this issue plenty of thought before it is too late.”

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