Blacks Solicitors’ Luke Maidens shares insight on the current legislations and requirements in place to improve the sustainability of the real estate sector in the UK.
The real estate and construction sector is currently responsible for almost 40% of final global energy use. And at the current rate of development around 80% of buildings standing today will still be in use within the next 50 years.
As part of the UK Government’s ‘Build Back Greener’ strategy plan the industry needs to shift its focus to long-term solutions for these existing properties to meet net zero requirements,
Sustainability has become a key pillar of corporate social responsibility (CSR) in the modern era with growing environmental awareness, which has become a fundamental driver, influencing both investors and occupiers.
The UK government has introduced several policies, regulations, legislations and building codes designed to mandate more sustainable practices in the construction and real estate sector. Construction of energy efficient buildings, protecting green spaces and renewable energy sources are all ways in which the property sector is demonstrating dedication to a more sustainable industry. These rules aim to ensure the property industry contributes to national environmental objectives and targets.
MEES
The Minimum Level of Energy Efficiency Standard (MEES) was first introduced in March 2015 by the Energy Efficiency Regulations. Initial restrictions were brought in from the April 1, 2018 and further restrictions from the April 1, 2023, which meant landlords in the UK were no longer able to continue letting buildings with an EPC rating of less than E.
Repurposing existing properties, ensuring compliance by 2023 in accordance with MEES and achieving net zero by 2050, contributes to a reduction in carbon emissions and future proofing properties against further legislative requirements on energy consumption and sustainability.
GREEN LEASES
A ‘green lease’ is best understood as a lease which includes provisions encouraging or requiring a landlord and/or tenant to limit or reduce the environmental impact of the building. There isn’t a set checklist which defines a ‘green lease’, it must simply contain commitments that are intended to boost the sustainability of a property and its environmental impact.
Green leases can be categorised into ‘light green’, ‘medium green’ and ‘dark green’ to indicate the varying degrees of commitments that landlords and tenants can make.
Light green clauses are typically not legally binding and impose limited commitments to improve the energy efficiency of a property. Dark green clauses are likely to be much more onerous and legally binding. Medium green clauses sit somewhere between the two and are often included in the lease itself, the building policy or estate regulations.
CLAUSES
Examples of various clauses include giving the tenant a right to install charging facilities for electric vehicles; a clause prohibiting alterations or repairs that negatively impact the property’s EPC rating; general use, specify obligations on the use and management of the property in accordance with sustainable principles and energy efficiency, although not yet enforceable, including a clause stating that all/a percentage of electrical power to be from renewable energy sources.
The need to achieve net zero is not only desirable but necessary for all. Parties can incorporate clauses within a lease for the sustainable operation and occupation of a property, however, it is important that owners and occupiers collaborate to achieve an agreement.
Introducing frameworks and legislations such as green leases and EPC requirements will support real estate properties in scoring highly on benchmarks such as Real Estate Environmental Benchmark (REEB). Scoring high on these benchmarks is likely to result in higher investments and a better-quality brand image for stakeholders, whilst achieving greater energy and resource efficiency in return.
Sustainability and green legislation will continue to be a priority for real estate in 2024 and beyond. As occupiers and investors prioritise sustainable practices, the industry must contribute significantly to more environmental processes to guarantee a resilient future for the sector.
Luke Maidens is Partner and Head of the Real Estate Litigation team at Blacks Solicitors
