The Royal Institution of Chartered Surveyors (‘RICS’) recently published its report on ‘Levelling Up and Sustainable Placemaking’ (“the Report”) which can be found here, Levelling Up and Sustainable Placemaking. The Report sets out the RICS overarching recommendations, with an interesting property focus on sustainability. There are some interesting recommendations that interact with a number of legal points. Our top takeaways are as follows:
- Retro-fitting: The Report flagged the promotion of sustainability by prioritising the repurposing and retro-fitting of existing commercial stock (over building new). This is to help drive down energy costs and ensure long-term viability. This can interact with commercial leases and in particular the alterations clauses in existing leases. Many tenanted buildings can be retro-fitted at lease events, with suitable legal documentation to record the position.
- Commercial lease renewals: The Report flagged plans for the future of commercial real estate moving beyond a ‘narrow focus on landlord v tenant’. The aspiration being to level up the overall agenda to release the full potential for tenants, as the underlying customers. There are interesting interactions and reflections with lease renewal negotiations, which can sometimes require a Court based process to resolve.
- ESG for commercial property assets: The Report flagged a need for the commercial property sector to increase its awareness of ESG (“Environmental, Social and Governance”) overall and how to measure ESG. Measuring changes in buildings is increasingly coming up with commercial conveyancing, in terms of due diligence to verify the asset management practices.
- EPC regulations: The Report flagged the power of commercial real estate as an enabler of regeneration. It suggested this be recognised and prioritised. The Report talked about the way funding could be prioritised for the renovation of commercial assets which risk ‘becoming stranded’. There is a link here for commercial leasing with the Energy Performance Certificate Regulations. Certain properties that do not meet the minimum energy standards are not possible to be leased, which can mean significant works, often covered with an agreement for lease before a new letting.
- Resi development and journey times: It was interesting to see the policy aimed at housing developments being located near employment, to decrease residents carrying out long commutes. The creation of a UK settlement strategy based on sustainable transport was noted as fundamental to the ‘proper stewardship of land and managing natural resources.
- Planning law and retail: The Report flagged that it should be recognised that commercial property, in particular the retail sector, is changing. The reflection was on the planning system to enable alternative uses of retail space more quickly. This feeds into the change of use lease wording and licences for alterations drafting that is often the subject of legal scurrility.
It is clear that the overall agenda is accelerating towards property that is managed to be sustainable for the long-term. This flags that the sustainable legal credentials of a commercial building can be important to its future marketability and indeed ability to obtain grants/statutory support in some cases.