The ban on a refrigerant gas used in air conditioning systems in 2015 will have a significant effect on both capital and revenue budgets over the next two years.
From 2015 it will be illegal to use hydrochlorofluorocarbons (HCFCs), including the ozone-depleting refrigerant gas R22, in refrigeration, heat pump and air conditioning systems. R22 has not been allowed for use in new systems since 2004. Since 2010 the use of fresh R22 in existing systems has been prohibited and only recycled or reclaimed R22 can be used. The supplies of reclaimed gas are fast running out and prices are increasing.
The solution to this rapidly approaching deadline will involve either the replacement of the air conditioning system or the adaptation of the existing plant to take an alternative approved refrigerant. Which path to take is a question that needs to be addressed sooner rather than later, bearing in mind that depending on the age and condition of the system the adaptation option may lead to lower efficiency and higher energy costs. This solution may therefore not be available given the legislative environment and increasing pressure to lower energy costs and emissions.
Who will pay? Both landlords and tenants should be examining the lease carefully. In multi-let premises the plant is usually defined as common to the property within the service charge. However, there may be service charge caps or exclusions to what can be recovered. Inevitably there will be the need to look at the repair or replacement scenario as commonly leases will allow adaptation as part of repair but not complete replacement. If a schedule of condition is in place plant may be excluded from the tenant’s obligations. Betterment may also be an issue depending on the solution that is applied. This is not going to be straightforward and parties are well advised to consult guidance such as The RICS Code for Service Charges in Commercial Property.
Rapleys is able to provide specialist advice on the implications for both landlords and tenants. Existing tenants will need to consider the cost implications of R22 now and how it might weigh in the decision making process, for instance, of whether to exercise a break option. It will also be relevant to dilapidations and at some point down the line rent review and lease renewal discussions. Incoming tenants may wish to caveat their repairing obligations or ring fence the cost of dealing with R22 gas.
Whether it’s a matter of advising on an existing lease or ensuring your position is protected when negotiating heads of terms and new lease drafting, Rapleys have the expertise. The important issue today, with less than two years to go, is to establish responsibility and start engaging with the parties involved on solutions and cost implications. If you need further advice please do not hesitate to contact one of our nationwide team of experts.