Progress is being made on reducing the impact the built environment has on climate change, but there will need to be a significant stop change to reach the Government's target of net-zero emissions by 2050.
Aside from being the right thing to do, there are a number of push-pull factors driving change, regulations and tenant demands, for example. But this is only part of the story.
Some of the required changes are so significant, that regulations will have to ramp up over time, and there are implications in that. And while the draft Environment Bill is missing key targets, climate change is starting to feature in case law.
The Future Homes Standard, due to be consulted on in 2023 and to come into force in 2025, is expected to require new homes to be "zero carbon ready" meaning that no retrofit work will be necessary to enable them to be net zero as the electricity grid continues to decarbonise. As an interim step, the Government will implement an interim change to Part L (Conservation of fuel and power) of the Building Regulations (to be in force in June 2022) requiring new homes to deliver carbon dioxide (CO2) savings of 31% compared to current standards through a combination of low carbon heating and increased fabric standards.
Building standards to meet net zero
Megan Coulton, Senior Associate at Trowers & Hamlins, says: "the Government's interim uplift to Part L of the Building Regulations puts us on the pathway to requiring better building standards for conserving heat and energy. But people sometimes forget that while Part L is a good step, it does mean that further investment will be required for those homes to be zero carbon ready, but homes built from 2022 will be better equipped to make the transition."
Retrofitting buildings to make them not only energy efficient but also ensure they are powered by renewable energy, is more expensive than designing in such features from the outset.
In fact, making existing buildings greener is one of the biggest challenges the real estate sector faces. Reporting requirements and EPC certification make it impossible to ignore.
Coulton says: "With the new reporting requirements, you have to look at your entire portfolio, and it will only become more important to do so. The bigger the business, the more high profile, the more important all of this is.”
This leads to the challenge of retrofitting, and how leases are structured is an important component.
Emma Barnfield, Partner at Trowers & Hamlins says it's not simply a case of passing the cost of retrofitting work on to the tenant: "The specific wording of the lease must be reviewed to ascertain whether it is a cost that can be passed on to tenants through the service charge. In the case of residential service charges in particular, legislation requires that those costs must be reasonable and justifiable. Commercial leases will have similar contractual provisions regarding reasonableness and landlords must also consider the shorter term interest of the tenant under a commercial lease in considering when and how to carry out the works and who should bear that cost.
"If the occupational leases do not permit necessary access to do the retrofitting works or recover the cost of those works, or it tenants are likely to be uncooperative, a preferred option for landlords might be to wait for when the lease comes to an end and upgrade then rather than negotiate with existing tenants."
Compulsory sustainability features
Legislation could make it an easier decision for landlords if upgrades are a legal requirement. Barnfield uses electric vehicle (EV) chargepoints as an example:
"Will the obligation to install EV chargepoints become compulsory for existing buildings in the future? You can see that's the way things might be heading.
"And if there is legislation, then that makes it easier to justify installing these and passing on the cost but only if you've got the relevant lease clauses that allow you to recharge tenants. That said, many tenants see the benefit of having these EV chargepoints and are requesting that their landlords install them."
In the case of EV chargepoints, there are other considerations for landlords. But regardless of what retrofitting work needs to be done, it would be wise to review existing leases to determine what the lease will allow and how the costs might be recovered.
There are potential cost benefits for landlords and tenants in having more energy-efficient buildings. When coupled with provisions such as EV chargepoints, these features could make buildings more attractive to businesses looking at their own sustainability targets.
The continued decarbonisation of the electricity grid will play a major role in meeting the net zero target. The electrification of heating and transport places significant demands on the energy infrastructure, but also opens wider opportunities for on-site generation (eg rooftop solar), private wire arrangements and battery storage. Beyond regulations, a further driver for climate mitigation in the built environment is likely to come from planning case law.
There is currently a disconnect between what is being said in government about climate change and what is being legislated for, and what is actually happening at the decision level. This disconnect is highlighted by the Climate Change Committee in its most recent report to Parliament (published June 2021) which used the planning framework as an example. The net zero target has been a statutory requirement since 2019, but there is no statutory requirement for local or national planning decisions to be made in accordance with the target.
Climate influenced planning decisions
The weight given to climate mitigation in planning decisions is variable across different local authorities and depends on who is involved in the decision making. Nonetheless, there have been some climate-related legal cases that have influenced planning decisions.
Helen Mitcheson, Solicitor at Trowers & Hamlins, points to a case in the High Court (William Ellis McLennan v Medway Council [2019] EWHC 1738) involving solar panels.
She explains: "The local planning authority had granted consent for an extension which would block sunlight to a neighbour's solar panels. Mr McLennan, the claimant, challenged this, resulting in the planning consent being overturned on the basis that the electricity generated by the solar panels was helping to mitigate climate change.
"While it is a relatively small case, this is the first time that climate change has been considered as a material consideration in the planning process.”
Bringing climate legislation and planning together could be the next step. The Climate Change Committee's progress report earlier this year proposed a 'net zero test' with the aim of ensuring all Government policies are compatible with UK climate targets.
The Centre for Sustainable Energy, as part of a coalition of environmental and social charities and NGOs, has also proposed an additional paragraph in the National Planning Policy Framework, that stipulates all planning policies and decisions must be in line with the objectives of the Climate Change Act, including the 2050 net zero carbon target.
Mitcheson says: "There's a lot of talk going on in this area, whether it will materialise into anything substantive or whether it's purely academic thinking is something that we'll have to wait and see.
"However, the fact that the case law has stopped to consider climate change coupled with local authorities declaring climate emergencies may mean a further push for change where there is no regulation – yet."
What the net zero target could do is bring all the different threads together, planning, construction, climate change etc. and get the built environment working in a way it hasn't before. But even if it doesn't, then there are still big changes to come.
Powering up EV chargepoints
While still only a very small proportion of cars on the road, the number of battery EVs is rising. Sales in September 2021 were up by 49.4%, according to data from the Society of Motor Manufacturers and Traders (SMMT).
Fuel shortages that have led to drivers queuing at petrol stations are also thought to be driving interest in switching to electric vehicles.
This increasing demand for EVs means increasing demand for chargepoints. New residential and commercial developments can have charging points as part of their design, and it will become a mandated feature soon. It may also become a mandated feature of existing buildings where major works are being carried out.
In the meantime, if landlords have residential or commercial tenants asking for EV chargepoints, there are other challenges, particularly if they need to install them at scale.
Coulton explains: "Aside from the problem of where to put them, there is the issue of whether the existing electricity connection has enough capacity to service that increased demand."
If it doesn't, that could require a significant grid upgrade to get the capacity which is another cost.
