phase out of HCFCs in air conditioning systems requires active
consideration
R22 is currently the most widely used refrigerant gas in air
conditioning systems, along with hydrochlorofluorocarbons (HCFCs).
However from 1 January 2015 it is being phased out and its further
use will be banned. This raises several questions, not least of
which is who will be responsible under a lease for converting or
replacing air conditioning systems that currently run on R22.
the law
The EU (Controls on Ozone-Depleting Substances) Regulations
2009, with other supra-national legislation, operate by reducing
worldwide production of HCFCs over a period up to 31 December 2014,
after which their production will be prohibited except for limited
research purposes.
This reduction in production is already causing the price of
HCFCs to increase, which is the intention. During the transitional
period, users are further being weaned off the use of HCFCs by a
phased tightening of restrictions as follows:
- Phase 1 - a ban on the use of new, previously unused, HCFCs
began on 31 December 2009; from 1 January 2010 until 31 December
2014, only recycled and reclaimed HCFCs can be used for the
maintenance and servicing of existing refrigeration and air
conditioning systems
- Phase 2 - from 1 January 2015, even recycled or reclaimed HCFCs
cannot be used; although there is no obligation to remove existing
HCFCs that might keep the system running for a while. Any loss of
fluid through leakage will not be able to be replaced.
The regulations have therefore been designed transparently, to
phase out the use of HCFCs by first increasing their cost and then
banning them entirely.
the key considerations
The use of HCFCs in new air conditioning systems is now banned.
As each existing system using HCFCs nears the end of its economic
life, property owners and managers must decide whether or not to
replace it, convert it to use a different, compliant, refrigerant,
or repair it and continue to use increasingly expensive, and
possibly unobtainable, recycled or reclaimed HCFCs until 2015 when
the decision will be made for them. In a landlord and tenant
situation, the decision will be affected by where the cost burden
will fall.
existing leases
Most leases of the whole of a building impose an obligation on
the tenant to comply with statutory requirements. Unless there is
something unusual in a specific lease, therefore, this obligation
will make the tenant responsible for converting or replacing the
air conditioning system as and when this becomes necessary. In a
multi-let building where the landlord controls the air conditioning
(or where the air conditioning system conditions the common parts),
the landlord is likely to be responsible for dealing with its
conversion or replacement through an obligation to comply with
statute in respect of the building as a whole, and will inevitably
seek to recover the cost through the service charge. Regarding the
potential high costs of carrying out these works, landlords and
tenants should review the service charge provisions in their leases
to ascertain the extent to which costs could be passed down to
tenants, as well as any constraints on the landlord in doing so,
for example by way of a service charge cap.
existing leases - how the responsible party can comply
Firstly, check that the air conditioning system does indeed use
an HCFC as a refrigerant because if it does not, there is nothing
to do. Assuming that it does, however, there are the following
issues to consider:
- If the lease expires before 1 January 2015:
- where the tenant is responsible, it may legitimately decide to
do nothing although it will be paying increasing costs for its
recycled or reclaimed HCFCs;
- where the landlord is responsible, it should consider whether
it is able to pass the costs relating to air conditioning to the
tenant via the service charge or otherwise, and if so, whether it
wishes to carry out works to the air conditioning system before the
lease expires. If the landlord does not carry out the works prior
to the expiry of the lease, it may have to cover the costs itself,
and indeed may be forced to incur those costs to get the property
let if prospective tenants are unwilling to take a new lease with
this potential liability.
- If the lease continues beyond 31 December 2014:
- the options for the tenant are replacement or conversion in the
medium term, and an economic and operational judgment call in the
meantime as to whether to continue with HCFCs;
- the options for a landlord remain the same as if the lease
expires before 1 January 2015.
- The mere fact that an air conditioning system runs on HCFCs
will not alone amount to disrepair.
new leases - questions to ask
It is essential that questions are asked by tenants and their
surveyors about the existing air conditioning system and what type
of gas it uses. These comprise:
- Does the property have air conditioning?
- If yes, does it use a refrigerant that is being phased out
under the EU (Ozone-Depleting Substances) Regulations 2009?
- If yes, what are the landlord’s proposals for complying with
the regulations?
- Is the landlord willing to take on the costs and responsibility
for complying with the regulations?
new and renewal leases - negotiating points
Even if the new lease is going to come to an end before 2015,
tenants should still seek to provide in the lease that the costs of
complying with the regulations should not fall on them as there is
nothing to stop the landlord from replacing or converting the air
conditioning system in anticipation of being forced to do so by the
regulations.
If the new lease will still exist after 2014 its length should
still inform in what proportion the costs should be borne between
landlord and tenant, and the state of the letting market will
dictate how far each party can push its position.
When deciding whether to renew a lease, a tenant should take
account of the regulations and the cost of complying with them
either directly or via the service charge. If the tenant does not
like the landlord's proposals, this is the opportunity to negotiate
a better position. Landlords will of course endeavour to maintain
the usual obligation on tenants to comply with statute and would
view any reduction in that liability as a concession in order to
get the property let.
conclusion
Where tenants decide they want to convert or replace an air
conditioning system, they should ascertain whether or not they need
the landlord's consent for the required works.
For tenants who are responsible for air conditioning at their
premises, whose leases expire before 1 January 2015, doing nothing
may be the most economic strategy. However, for landlords and other
tenants responsible for air conditioning, this approach is a
potentially costly option in the medium- or even short-term.
Ignoring or putting off consideration of these regulations will
simply make the eventual decision more expensive to implement, and
expose the responsible party to enforcement action by either the
Environment Agency or the Local Authority, both of whom have
responsibility for enforcing the regulations.
