Property investors with an interest in landlord insurance are being urged to think carefully before they install district heating systems as lawyers warn of legal uncertainty over charges to tenants.
The rush, by mainly social landlords, to push ahead with district heating systems has been precipitated by billions of pounds worth of Government funding for which district heating schemes can apply. District heating schemes can provide heat to multiple buildings in one area and thus remove the need for landlords to install boilers in each individual unit. The Government’s community energy savings programme will provide subsidies to schemes aiming at energy efficiency solutions until December this year and at present it is estimated that 60 such projects are already under construction, with many more in the pipeline. The Department of Energy and Climate Change (DECC) estimate that district networks are already the heat source for over 170,000 buildings in the UK and that eventually such systems could provide heating for half of the country’s heating requirements.
However, there is a big problem for landlords. Lawyers say landlords must carefully consult tenants about heating charges before rushing into signing up for the new systems as under the Landlords and Tenants Act of 1985 any mistakes in the procedure could lead to tenants having their heating bills capped at £100 per annum. Solicitor Rhianna Wilshire said: “The Landlord and Tenant Act was not drafted with long-term district heating arrangements in mind and it is important that a landlord considers section 20 consultation requirements at the earliest opportunity. Appointing heat suppliers on long-term arrangements for new build schemes may be complicated if there are no tenants in occupation at the time that the agreement is procured and signed.”
It is believed that tenants have already won cases against landlords in these circumstances and for some the December deadline may have to be missed for the sake of prudence.