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New Legislation - Can Schools Validly Grant New Tenancies of Property from 1 April 2018?

on Thursday, 22 March 2018.

Many academies use their property assets to generate additional income to supplement the core funding they receive. In addition, many academies operate from sites which are made up of buildings constructed many years ago and/or have inherited sites...

... with significant repair issues.

Against that backdrop, a change in legislation came into effect on 1 April 2018 which is relevant to academies.

What Are the Changes?

The change brought into effect by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 made it unlawful from 1 April 2018 for landlords to grant a lease or tenancy or renew existing lettings of properties if the energy performance rating of that property is worse than an E rating (on an energy performance certificate).

This change forms part of a number of stepped changes, which will also mean that:

  • from 1 April 2020 it will be unlawful for landlords to continue to let residential property with an energy performance rating of worse than E
  • from 1 April 2023 it will be unlawful for landlords to continue to let a commercial property with an energy performance rating of worse than E

Which Lettings Does This Apply to?

The changes only affect certain types of property transactions including:

  • leases of commercial premises - for academies this can be operational property, most commonly sports facilities
  • the grant of residential tenancies - for academies, the grant of assured shorthold tenancies, most commonly for staff, will be caught

Importantly for academies, they don't apply to service occupancies (where you have a resident caretaker or another employee who is required under their employment contract to reside in accommodation provided by the academy) or short term hiring agreements.

Lettings of certain types of properties, for example temporary buildings with a lifespan of less than 2 years and certain (not all) listed buildings, are also exempt from the regulations.

What Are the Penalties if These Regulations Are Breached?

The penalties differ depending on whether the property is residential or commercial.

As well as a penalty relating to the breach, there are also penalties relating to failure to provide trading standards, which will enforce the regulations, with the relevant information or, for example, applying for an exemption (see below) which is misleading.

In addition to financial penalties, there is a reputational issue as a central register will be published which lists the name of any entity or organisation found to be in breach of the regulations.

Are There Any Exemptions?

A number of exemptions can apply.

The exemptions are all temporary and are applied for on a self-certification basis. This means that academies need to understand the scope of the exemptions and build up a bank of evidence to confirm how that exemption applies to their property.

For example, an exemption allows non-compliance with the regulations where third party consent is required to carry out energy efficiency improvements and that consent can't be obtained. A practical example of this could be a landlord's consent where the academy leases the site from a Council but the Council won't consent. At the end of the temporary exemption period, the exemption will need to be reconsidered.

We have a team of commercial property lawyers who specialise in advising academies on a wide range of property issues. If you would like to discuss any issues arising out of the changes in legalisation or any other property issues, please contact Robin Rajanah on 0117 3145 5255.

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