Partner Katja Wigham, head of our Commercial Property team, outlines the factors that landlords and tenants should consider as a result of high energy prices.
As the cost of living rises across the UK, the increase in energy prices is likely to affect both landlords and tenants. The Government has recently announced new legislation to provide further support, but this has already been the subject of review.
The standard position for commercial leases is an obligation on the tenant to pay energy suppliers direct. Though, this isn’t always the case, and it is for negotiation between the landlord and tenant how utility costs are dealt with in the lease.
Moving forward, we would recommend that landlords avoid granting leases with all-inclusive rent. This is when rent and bills are combined and if this is fixed, the landlord will not be able to pass on increased costs to the tenant, regardless of the actual consumption of energy. If this type of lease is to be entered into, we would suggest adding an additional clause within the lease stating that if energy charges exceed a certain amount, the tenant will pay the additional amount.
Another thing for both landlords and tenants to be mindful of is the cost of energy in multi-let buildings. Where buildings, such as office blocks or industrial units share energy supply, it could be argued that it is unfair to split the bill between the tenants equally. This will be a particular concern where one tenant’s consumption is some way above the others. It may be fairer for meters to be installed which monitor the usage of each tenant, so they are only paying for their own share. Indeed, this is already a requirement for many multi-let buildings where the energy used is for heating or cooling under the Heat Network (Metering and Billing) Regulations 2014.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
