Landlords of multi-let buildings - new metering and billing requirements

Landlords of multi-let buildings - new metering and billing requirements

Published:

Author: Tim Flight & Sally Newton

Applies to: UK wide

New regulations on communal heating and cooling systems in multi-let buildings impose important obligations on landlords, with penalties for non-compliance.

The Heat Network (Metering and Billing) Regulations 2014 cover most district heat networks and communal heating systems within the UK and they apply to residential, commercial and industrial buildings. They stem from the European Energy Efficiency Directive 2012.

The regulations require landlords (as heat suppliers):

  • to provide information about the communal heating and cooling systems in their multi-let buildings to the National Measurements Office (NMO) by 30 April 2015;
  • if it is cost effective and technically feasible to do so, to install meters to measure the supply of heat/cooling/hot water to individual occupiers in those buildings by 31 December 2016, and;
  • to base bills on the actual supply to the individual occupiers.

What is a heat supplier?

The regulations impose obligations on a 'heat supplier' who is the person who supplies and charges for the heating, cooling or hot water to a final customer - whether through communal heating or a district heat network. Communal heating is defined in broad terms as the provision of heating, cooling or hot water from a central source in a building that has more than one occupier.

The NMO has issued guidance to help clarify what is caught by the regulations and gives a number of examples, such as sheltered and social housing, university halls of residence, shared offices and shopping centres.

Notification by 30 April 2015

Heat suppliers must submit to the NMO a notification by 30 April 2015 about their communal heating systems or any district heat network including:

  • the estimated total per calendar year of the heating capacity, heat generated and heat supplied;
  • the number and type of meters or heat cost allocators.

Whilst the notifications can be supplied in any format, the NMO encourage these to be submitted by email using a template available on the government's web page for the regulations. An updated notification must be supplied every four years.

Meters/heat cost allocators

Heat suppliers must ensure that meters are installed in buildings with more than one occupier by 31 December 2016 to measure the supply of heat, cooling and hot water to each individual occupier - but does not have to do this unless it is cost effective and technically feasible.

Schedule 1 to the regulations contains detailed provisions to determine cost effectiveness and technical feasibility. For example, cost effectiveness is based on a list of specified costs and on projected energy savings over a ten year period.

If the supply of meters does not pass this test, the heat supplier must install heat cost allocators, thermostatic radiator valves on room radiators and hot water meters - unless, again, it is not cost effective and technically feasible.

The regulations also impose duties when an existing meter is replaced.

Billing

Where meters or heat cost allocators are installed, a heat supplier must provide a bill based on actual consumption of heat and cooling and supply detailed billing information - as long as it is technically possible and economically justified to do so. This will be satisfied as long as it does not cost more than £70 per occupier per year to provide the bill and information. The cost can be passed on where there is more than one occupier in the building as long as no profit is made from the charges.

Penalties

The NMO will enforce the regulations. The main duties are subject to criminal penalties including fines but the NMO can use civil sanctions instead.

Comments

  • landlords need to act now to determine which buildings may be affected by these regulations and make the required notification by 30 April 2015. They must then carry out the analysis of cost effectiveness and technical feasibility;
  • the regulations do not consider whether a heat supplier has to obtain a tenant's consent to install a meter or other required equipment - so landlords will need to grapple with this issue if it arises;
  • some leases provide for division of energy costs on e.g. a floor area basis and it is not known at this stage how this will be reconciled with the requirement to bill based on actual consumption;
  • landlords will also need to review occupational leases to determine whether the cost of providing the equipment and billing costs can be recovered through lease provisions.

On 26 March the government introduced an amendment to the Heat Network (Metering and Billing) Regulations to revise the deadline for notifications from 30 April 2015 to 31 December 2015. This change will allow more time for data gathering to be scheduled or commissioned as part of other work to be carried out by the heat supplier.

Disclaimer

This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

About the Author

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Tim Flight

Senior Associate

03700 86 4062

Tim is an experienced real estate lawyer advising on all aspects of landlord & tenant and property investment work.  In addition Tim carries out commercial development work and provides real estate advice for the banking, corporate and insolvency and restructuring teams at Shoosmiths.

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