With maintenance and reparation budgets understandably being given reduced priority as the economy narrowly avoids a triple dip recession, the likelihood of firms needing to spend considerable sums in order to maintain compliant air conditioning installations may be given a chilly reception.
Whilst arguably poorly publicised to date, EU legislation that started taking incremental effect from 2010 is bringing about a ban on the further use of artificial refrigerants such as chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs). The most common of these in use in the UK’s air conditioning installations is R22 (HCFC).
As of January 2015, the use of even recycled HCFCs will be prohibited for the maintenance and servicing of an air conditioning system. This will effectively render such systems obsolete (through inability to repair and replenish) or in need of conversion to alternative refrigerants, by way of refurbishment, where possible. Conversion to alternative refrigerants or ‘drop-ins’ as they are known, however, holds many problems with either greatly reduced performance or, in a many cases, full system failure.
Much technical information has already been written about the intricacies of the EU Regulation 2037/2000, but the specific implications for commercial property landlords and tenants leaves much to be debated. A question that has been readily raised, by those who have caught wind of the changes, is with whom the responsibility will rest to replace or refurbish existing air conditioning systems using the banned substances?
Whilst many might think it is merely a case of referring to the terms of the lease in order to determine responsibility, the precise wording of relevant lease clauses (such as repair and statutory compliance) will be key, but previously set precedents relating to the repair and maintenance of property by landlords and tenants will dictate that the actual point of responsibility. So the situation is far from clear cut.
Particularly onerous repairing covenants, inclusive of clauses requiring wide reaching statutory compliance, are common place for tenants with commercial leases. However, precedent-based arguments relating to claims of improvement or betterment, supersession and the matter of loss are all issues that should be given careful consideration, both during the term and post term, when dealing with claims for dilapidations.
Although the complexities of the legal positions are far from clear in relation to the biggest changes ever to affect the air conditioning industry, the implications of non-compliance have been made very clear. Via enforcing bodies including the Environment Agency and local authorities (likely to delegate powers to Trading Standards and Environmental Health), prohibition and the enforcement of specific undertakings can be brought about, with further non-compliance said to bring about criminal prosecution.
To add extra impetus to the need to achieve compliance, the air conditioning industry warns that it is unlikely to be able to meet anticipated demand for replacement and refurbishment of affected systems prior to January 2015.
Another, as of yet relatively unknown, piece of legislation for air conditioned buildings is the TM44 inspection requirement. Under the Energy Performance of Buildings Directive, buildings with a total cooling capacity of 12kw and above, now require inspection and the production of a TM44 report and certificate at five year intervals.
All commercial building TM44 reports are held on the government’s Landmark site, with Trading Standards responsible for enforcement of the legislation, who have access to the Landmark site, affording full visibility of all commercial building submissions within England and Wales. Non compliance will result in substantial rolling fines for non-compliant parties.
Although possibly seen as another ‘tax’ on struggling industries, the driving factor behind the reporting requirement is to identify means of reducing carbon emissions from buildings, together with operating costs. In many cases, the cost of the inspection is said to be possible of recovery within 18 months worth of cost savings, should report recommendations be implemented.
It’s not all frosty news for building owners, however, as many new, efficient ‘green’ systems qualify for the Enhanced Capital Allowance scheme (ECA), allowing for the cost of purchase and installation of the new systems to be offset against certain tax liabilities. In addition to the ECA scheme, the government’s new Green Deal initiative offers various means of financing and incentivising the undertaking of works to buildings to improve energy efficiency and performance.
Demystifying the new legislation is likely cause some landlords and tenants to get hot under the collar but the full implementation of these requirements is near and the financial implications of achieving compliance will be significant.