Government landlord commits to large sustainability investment

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One commercial landlord, a Singapore registered real estate investment trust, established to invest directly and indirectly in UK commercial assets, has already bitten the bullet!

Elite Commercial REIT a £293m market cap business has re-geared leases, getting lease commitments from its government tenant, to invest £12.5m over the next three years in an Asset Enhancement Initiative (AEI). These works will improve the sustainability and energy efficiency of buildings in its portfolio that are currently occupied by the UK’s Department for Work and Pensions (DWP).

The DWP is one of the UK’s largest department responsible for people’s welfare, pensions and child maintenance and it occupies buildings throughout the UK.

The real estate investment trust Elite says it is to collaborate with its major tenant, the DWP, to boost the sustainability and energy efficiency of its occupied estate.

The AEI works are to include repair, replacement or upgrading of existing lighting, heating and cooling systems, as well as insulation and solar panels. The aim is to upgrade the Trust’s properties’ Energy Performance Certificate (EPC) ratings to meet the forthcoming higher regulation standards.

Shaldine Wang, chief executive of the commercial property management group, Elite, has said:

“Investing in retrofitting works to enhance the energy efficiency ratings of assets in the portfolio will contribute towards reducing their environmental impact.

“This win-win initiative demonstrates our commitment to adapt our portfolio to address sustainability and climate change requirements, and to extend the relevance of our assets to tenants,” she says.

Elite’s re-gearing of the DWP leases means that it’s got commitment from its government tenant to support its new investment, to be matched with DWP’s agreement to the removing of lease break options. The lease re-gearing gives Elite the added security of knowing that its high quality government tenant is committed to stay for the full length of its lease.

Elite currently has 117 properties leased to the DWP which represent over half of the Reit’s total portfolio in gross rental income, with a lease break option currently set for March next year.

After the re-gearing, Elite secures nearly 80% of its income from the government estate through to 2028, in return for its commitment to the new investment in sustainability, albeit with a small number of the properties enjoying some rent reductions.

Commercial landlords under pressure to improve

The Elite move is likely to be one of the first of many moves to secure tenants into the future by committing to improve the energy efficiency of their tenants’ buildings, while they remain in situ.

The government’s commitment to its net zero target means it is lifting the minimum energy efficiency standard in to-let non-domestic buildings to an EPC rating of ‘B’, as part of its target for the UK being net zero by 2050.

Currently, with very few buildings exemptions, landlords must not let a building not complying with the minimum energy efficiency standard, currently set at an ‘E’ rating on a valid Energy Performance Certificate (EPC).

But the “E” rating is a now likey to be an interim measure, and landlords are sitting on an investment “time-bomb” as the target is to be lifted to a minimum energy efficiency standard for non-domestic buildings to ‘B’ by 2030.

To achieve this higher rating will involve owners in considerable expense for most buildings, though upgrading should result in lower maintenance and energy costs.

It has been estimated that the 2030 upgrading deadline to an EPC “B” for all those buildings affected could involve a total of around 85% of the UK’s rented commercial buildings.

Consultation

The Department for Business, Energy & Industrial Strategy is soon to publish the results of a recent consultation on changes needed to the Minimum Energy Efficiency Standards (MEES) Regulations in the commercial sector to meet the new target commitments, entitled ‘Non-domestic Private Rented Sector minimum energy efficiency standards: EPC B implementation’.

The government is proposing a phased-in implementation of the ‘B’ minimum standard by setting an interim target for 2027 of a minimum standard of EPC ‘C’ for commercial buildings, but this target has yet to be agreed.

It has been estimated by the government that currently around 10% of UK commercial let buildings are still below the minimum ‘E’ rating. From 1 April 2023, commercial landlords with tenants in situ will be breaking the law if they continue to let, if the building has an energy rating below ‘E’.

In some cases buildings will be without a valid EPC after 2023 if the usual 10-year EPC lifespan has expired. It is the government’s intention to change the rules on this so that a building must always have an EPC in place which lasts the whole length of the tenant’s occupation.

This would mean that in future, in cases of lease renewals, there would be a change to the current guidance that suggests that an EPC is not necessary at that point.

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‘Disappeared’ lettings agency to pay £30,000 to tenants over unlicensed HMO

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A rogue letting agent has been hit with rent repayment orders totalling more than £30,000 after failing to licence an HMO.

The owner of 67 Cleveland Way in Bethnal Green let the property for single household use to Home Connect Ltd, who in turn sub-let it to J&G Home Share Limited, who then rented it as an HMO.

A First Tier Property Tribunal heard that the property was covered by Tower Hamlets Council’s additional licence scheme which has been running since April 2019.

One of the five tenants, Axel Buchaillot, lived there from September 2020 until March 2021, paying £628 a month. He told the tribunal that all six rooms in the property were occupied by separate households during that time.

The tribunal also heard that J&G Home Share Limited had taken no active role in the proceedings and had effectively gone to ground. The five-year-old company appears to have ceased trading – its Companies House listing reveals it is about to be struck off the register for failing to submit its annual accounts, although it still has an active director – Manuel Perez.

Judge Shepherd ruled that the agent was the responsible party with regard to the rent repayment order as it had granted the licence/tenancies to the applicants.

He said: “The tribunal has no hesitation in finding that the premises were being operated as an unlicensed HMO at the time of all of the applicants’ occupation, such that the applicants are all entitled to rent repayment orders.”

Each of the five tenants were awarded full rent repayment orders, adding up to £30,310.

Read the tribunal decision in full.

J&G Home Share Limited has 28 days to appeal the decision.

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Misleading New Permitted Development Rights Claim

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Linda and I have been myth-busting following a number of people contacting us to highlight our series on planning and permitted development had missed a recent update. Some social media posts had pointed to changes in industrial PD rights.

Unaware of any changes

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Landlords urged to help house Ukrainian refugees – but how will it work, NRLA asks?

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Landlords need more support if they are to help house fleeing Ukrainians, according to the National Residential Landlords Association.

Following the Home Secretary’s announcement that 100,000 extra refugees will be allowed to come to the UK, chief executive Ben Beadle says it’s right that the country provides all the support needed to those fleeing the conflict.

“We urge all private landlords to consider what accommodation they might have available to house those who want to come here,” adds Beadle (pictured).

“To assist with this, it is vital that the government swiftly provides details as to how landlords can easily register properties that might be suitable for those who need homes.” 

In answer to a question about what the government was going to do about a lack of accommodation for refugees and asylum seekers, Home Office minister Kevin Foster told the Commons: “We are certainly concerned about the lack of suitable accommodation across the United Kingdom in terms of dispersal areas, which is why we are keen to sign up new areas to become dispersal areas.”

Priti Patel said it had lowered various requirements and salary thresholds so that refugees could be supported.

“Where family members of British nationals do not meet the usual eligibility criteria but pass security checks, UK Visas and Immigration will give them permission to enter the UK outside the rules for 12 months and is prioritising all applications to give British nationals and any person settled in the UK the ability to bring over their immediate Ukrainian family members.”

She added that the government was enabling Ukrainian nationals already in the UK to switch free of charge into a points-based immigration route or to the family visa route.

“We are extending visas for Ukraine temporary workers in some sectors, and they can now stay until at least December 2022.”

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BREAKING: Landlords win ministerial apology over UC rent arrears problems

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The benefits minister has apologised for contradicting experienced landlords about how rent arrears from Universal Credit (UC) are paid and has moved to improve the system.

Benefits landlord Mick Roberts had long been frustrated by the fact Third Party Deductions – taken from a tenant’s Universal Credit payment to cover rent arrears and prevent them from being evicted – has been paid to landlords at completely different days and dates to the Housing Element, which is paid at the same time as Universal Credit.

But when his MP wrote to Minister for Welfare Delivery David Rutley (pictured) in November, Rutley insisted Roberts had got it wrong, despite having bank statements to prove it.

Rutley, who is responsible overall for the management and delivery of Universal Credit, has now written to MP Alex Norris to clear up the muddle, saying: “I sincerely apologise for any confusion and inconvenience the previous reply caused…I share your constituent’s frustration and have worked with my officials to get clarity on the situation.”

Aligned

Roberts called for the payments to be aligned and the Minister has announced that from March, new applications for rent arrears from PRS landlords will receive deductions directly via the Universal Credit system – ensuring they are calculated, deducted and paid to landlords following each assessment period. Existing arrangements will not change.

In the letter, he explained how a third-party payment system paid out the arrears based on a different time-frame, rather than the Universal Credit system.

Rutley added: “Officials are looking at how Universal Credit will operate when legacy payment systems are retired, including how deductions for rent arrears can be paid to landlords in the most efficient and sensible way.”

Roberts (pictured) says he’s not happy with the response because Universal Credit and the third-party teams don’t talk to each other and simply pass the buck.

“It’s taken three years to get a reply and it doesn’t change my situation,” he tells LandlordZONE. “Let’s hope the new system will be better for new claims.”

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