Obligations for landlords with communal heating systems
The Heat Network (Metering and Billing) Regulations 2014, which came into force in England, Wales, Northern Ireland and Scotland on 18 December 2014 and were amended in 2015, have the ultimate aim of improving energy efficiency and giving occupiers of property more accurate information about their energy consumption. They initially coincided with the UK Government's nationwide rollout of smart meters amid growing demands from consumers for greater transparency and fairness in energy pricing. This briefing considers the law as it affects England and Wales.
The regulations apply to multi-let residential and commercial buildings. They impose obligations on the person who supplies and charges for communal heating, cooling or hot water, where occupiers pay their energy costs either directly or through a service charge. This might be a landlord, intermediate landlord or management company depending on individual circumstances.
Until April 2016, these regulations were enforced by the National Measurement and Regulation Office which is now part of the Office for Product Safety and Standards (OPSS).
For communal systems in operation on or before 31 December 2015, landlords had to inform the OPSS before 31 December 2015 about their buildings' communal heating, cooling and hot water systems. Non-compliance may constitute an offence punishable on summary conviction with an unlimited statutory fine. It is beyond the scope of this article to advise about the potential criminal sanctions but one would expect that late compliance would be better than non-compliance so landlords should probably comply with these obligations as soon as they become aware of them.
For communal heating systems first commencing operation after this date, the OPSS must be informed on or before the first date of operation. Non-compliance also carries the same punishment as above.
Going forward, this information must be supplied to the OPSS at least every four years.
Landlords can use the OPSS notifications template.
From 31 December 2016, landlords must have installed meters to measure the supply of heat, cooling or hot water to each occupier in multi-occupancy buildings unless it would not be technically feasible or cost-effective to do so. There are threshold tests to be met to consider whether it is technically feasible or cost-effective. It may be deemed cost-effective to install suitable meters where the net present value of the projected energy savings as a result of the meter installation (over first 10 years of installation) exceeds the net present value of installing them. It is presumed to be technically feasible to install the meters in predominantly residential buildings, but this may be displaced. For full details of the threshold tests please see the 2014 Regulations and the 2015 Amendments.
If it would not be technically feasible or cost-effective to install meters, landlords may have to install (presumably cheaper) heat cost allocators, thermostatic radiator valves on radiators and hot water meters instead. Again, landlords may be able to escape the obligation to take these steps if it would not be cost-effective or technically feasible to do so.
There are also ongoing obligations to ensure meters are continuously operated, properly maintained and periodically checked for errors.
Despite the requirement to install meters, the regulations do not give landlords a statutory right to enter let premises. At first glance, this looks like a significant oversight. Landlords will therefore need to consider what rights of entry are reserved under their leases and whether arrangements can be made with tenants to comply with these obligations. It might be that the failure of a tenant to give access would be a reasonable defence to any enforcement action but specific advice should be taken.
Where meters or heat cost allocators are installed, landlords must ensure billing is accurate and based on actual meter readings. Landlords will also need to provide tenants with certain billing information where it is technically possible and economically justified.
Under the regulations, landlords may pass on to their tenants the reasonable costs of billing where it is carried out by an agent. Landlords should also check the provisions of their leases to determine whether the cost of complying with the regulations might be recoverable from tenants.
Ed Cracknell, senior associate in the property and housing litigation team at Russell-Cooke, comments; "the regulations have not been widely publicised, and may come as a shock to some landlords or managers of buildings that contain communal heating systems. There may be some argument about who the obligations fall to, particularly where there is a complicated leasehold structure. There is certain to be argument about whether it is technically feasible and cost effective to install individual meters or heat cost allocators in particular buildings. In cases of doubt, specific advice should be taken."