Carbon Reduction Commitment (CRC) Scheme Update

Posted: Friday, 23 April 2010 @ 11:50
The Carbon Reduction Commitment (CRC) came into force on 1 April.
CRC is a compulsory carbon dioxide emissions trading scheme where large organisations are required to buy allowances based on how much CO2 they expect to emit from their buildings during the year. The CRC will inevitably have a knock on effect to small and medium sized businesses, many of which will be tenants in buildings where the scheme applies.

As is the case with any commercial lease the landlord will be looking to recoup from the tenants all costs associated with managing the building. The fundamental question is should tenants be required in their lease to contribute a proportion of the CRC scheme costs that the landlord has to pay out? Logically the answer will almost certainly be yes but how this is calculated fairly is difficult and still being decided. For example you could have the situation where tenant A occupies twice as much space as tenant B but is much more efficient so uses less energy. Presumably tenant A should contribute a smaller proportion than tenant B but if the calculation is based on floor area alone then they would actually be paying more.

The second major point to consider is that any landlord affected by the scheme will now have a major incentive to make improvements to their building in order to increase its energy efficiency and reduce the net amount paid in CRC allowances each year. Will landlords look to recover these costs through the service charge provisions in the lease or put the onus on tenants in the future to make these changes?

It should be noted that the first year of the scheme is for reporting purposes only and so participants will not begin to buy allowances until April 2011. However the next few months will be key in determining how far the CRC scheme will increase costs for SME tenants and whether it hastens the move towards “green leases”.

For more information on how the CRC scheme works contact Steve Petty, Commercial Property Solicitor
01926 629 005
This blog is not intended to constitute legal advice, nor is it intended to be a complete and authoritative statement of the law, and what we say might be out of date by the time you read it. You should always seek legal advice to confirm whether or how any information in this article applies to your particular situation. We offer a free telephone consultation to discuss your particular circumstances.

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Thank you. Your response is great, very straight to the point! Hopefully this will bring an end to the matter. I will certainly be recommending your services as I am very impressed with the prompt dealing of this matter.
Janet Burbidge

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