Two arms tied behind our back

The landlord/tenant arrangement is one of the greatest barriers to improving the energy efficiency of buildings. The problem is simply expressed. Why should a landlord, who does not pay the fuel bills, fund measures intended to reduce those bills? In turn, why should a tenant pay to improve a property that belongs to somebody else?

I think a small alteration to a 23-year-old act of parliament could facilitate a way round this conundrum.

Right now, even if the leaseholder is prepared to fund the work, legal difficulties constrain action. The tenant’s locus effectively ends at the inner surface of the exterior walls. Any cavity between the two skins of brickwork belongs to the landlord. The legal authority of the typical top-floor flat ends at the ceiling: the uninsulated attic space falls within the “common parts”, which is the landlord’s domain. Similarly, exterior windows belong to the landlord.

Since 2004, the Landlords Energy Saving Allowance has permitted up to £1,500 of expenditure on insulation in residential premises to be offset against tax. Sadly, to date this has benefited only 0.3% of tenancies

Whether the building is purpose-built or a conversion, the foundations, main structure, exterior and roof are the responsibility of the ground landlord. That makes it difficult for a leaseholder to undertake most standard fabric-related energy conservation measures.

So can the landlord be persuaded to fund the improvements? Since 2004, the Landlords Energy Saving Allowance has permitted up to £1,500 of expenditure on insulation in residential premises to be offset against tax. Sadly, to date this has benefited only 0.3% of tenancies. There are no sticks to require landlords to undertake energy improvements - although the Scottish executive has legal powers to require upgrading.

Even when a landlord is amenable, property law does not smooth the path, particularly if each leasehold is for one in a block of flats, or a single office in an office block.

This is because a landlord is able to pass on any expenditure incurred only if there is clear authority under the existing lease to do so. Few leases make reference to expenditure on energy-saving measures. Occasionally “sweeping up” provisions can be found in leases permitting landlords to pass through expenditure undertaken for the benefit of the block. But tenants frequently object to these provisions as conferring “blank cheque” powers on landlords.

So energy improvements can really only take place if the landlord is prepared to undertake them, and if most tenants agree voluntarily to contribute. Section 37 of Part IV of the Landlord & Tenant Act 1987 does permit lease variation, so long as 75% of tenants agree, and no more than 10% object. Such a significant hurdle is surely the reason this option is seldom employed.

But with a judicious tweak, the Landlord & Tenant Act may present a way around this problem. Section 35 permits either a landlord or a leaseholder to vary the lease in order to ensure it complies with minimum standards. These are currently restricted to require any lease to contain adequate provision for:

• repair or maintenance
• the provision of reasonably necessary services
• insurance arrangements
• the computation of the service charge.

What we now need is a small addition to this list. It should relate to the provision of reasonable measures to improve the energy efficiency of the flat or commercial premises, and of the building of which it forms part. The word “reasonable” is necessary to assure sceptics that over-enthusiasm won’t lead to over-specification.

Making this alteration to section 35(2) would not even require primary legislation. Section 162 of the Commonhold and Leasehold Reform Act 2002 permits this section to be altered by statutory instrument.

I urge ministers to table this regulatory alteration right now. It will be an important liberating signal to those who would like to improve the rotten energy standards of our building stock. I am convinced this includes the majority of leasehold tenants - and the majority of landlords.

Andrew Warren is director of the Association for the Conservation of Energy