This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
Landlords need to be aware of The Heat Network (Metering and Billing) Regulations 2014 which potentially impose important duties on them in relation to:
- the notification of certain information about heating or cooling systems;
- the installation of meters; and
There are potentially tight time limits for compliance and serious penalties for non-compliance.
Who is subject to the duties?
"Heat suppliers", defined as a person who supplies and charges for the supply of heating, cooling or hot water to a final customer, through "communal heating"; or a "district heat network". It is considered that this will include owners/landlords of multi-let buildings who pass on the cost of energy to their tenants (the final customer), either directly or via the service charge.
"Communal heating" is defined as the distribution of thermal energy in the form of steam, hot water, or chilled liquids from a central source in a multi-let building occupied by more than one final customer, for the use of space or process heating, cooling or hot water. "District heat network" means the distribution of thermal energy in the form of steam, hot water or chilled liquids from a central source of production through a network to multiple buildings or sites for the use of space or process heating, cooling or hot water - this is large-scale, central generation of heat to serve an entire estate or community.
Which properties are affected?
Examples specified in National Measurement Office guidance include shopping centres; university halls of residence; rented accommodation with a single heat source supplying multiple dwellings including houses converted into flats/bed-sits relying on the original heating system; sub-let space such as fitness centres or restaurants in hotels or third party dry cleaners in supermarkets; an industrial site where a contract exists for the supply of heat through a network, for example to an adjoining plant; and shared offices. Exclusions include an industrial site where heat is generated and distributed within the site as part of the industrial process.
The National Measurement Office has come up with the following situation that demonstrates how this can impact on landlords (although they may not naturally be thought of as suppliers of heat). Company A operates a boiler supplying heat into a district heat network. Building Owner B receives heat from company A. B rents out its building to two companies C and D, but there is no contractual relationship between A - C or A - D. In this situation, B is the supplier to C and D who are separate final customers in a multi-occupancy building. A is a supplier to B as part of a district heat network. Both A and B will have to meet the obligations of the Regulations.
Duty to notify
Such heat suppliers have to notify the National Measurement Office various pieces of information in relation to the communal heating or district heat network. An example being the estimated total for that district heat network or communal heating per year of installed heating capacity, heat generated, and heat supplied. The information (detailed in full in regulation 3(1) of the Regulations) must be provided on or before 31 December 2015. If the network or heating starts operation after 31 December 2015, the information must be provided on or before the first date of operation. The information must be updated every four years.
Duty to install meters
Where heating, cooling or hot water is supplied from a district heat network to a building occupied by more than one final customer, the heat supplier must ensure that meters are installed to measure that heating, cooling or hot water to that building. This requirement came in on 18 December 2014.
Perhaps of greater relevance in a landlord context, there are also duties to install meters to measure the consumption of heating, cooling or hot water by each final customer (such as the tenants) together with temperature control devices, but they need not be installed, unless it is cost effective and technically feasible to do so. The Regulations provide further information on how the determination of cost effectiveness and technical feasibility is to be made by the heat supplier. If such meters are not cost effective or technically feasible, there is a duty, in a multiple tenant context, to install heat cost allocators, thermostatic radiator valves and hot water meters and if those latter measures are also not cost effective or technically feasible, then alternative methods may be used for determining charges for the supply of heating and hot water. The duties in this paragraph in relation to multiple tenant/communal heating come into force on 31 December 2016, for a single final customer it was 18 December 2014. Importantly, there is no exception to those duties where a tenant refuses to consent to the necessary works, although existing landlord's rights in the lease may enable the carrying out of the works.
There are also obligations if an existing meter is replaced and in relation to the installation of meters in new buildings or buildings subject to major renovations.
There is an important point on billing. The bills issued by the landlord to the tenant must be based on actual consumption and satisfy certain minimum requirements laid down in the Regulations. This requirement came into force on 31 December 2014.
It is important to note that there are powers of entry, civil sanctions and, ultimately, criminal sanctions (including potentially unlimited fines) if there is non-compliance with the Regulations. However, no person may be prosecuted for an offence in respect of any failure to comply with the duties occurring before 30 April 2015.
There is now a tight timetable in which landlords and other heat suppliers must consider what they need to do to comply with their duties under the Regulations with a backdrop of potentially serious penalties for non-compliance. Landlords will also need to ascertain whether the leases in their buildings allow them to fulfil their statutory duties.
For further information
All enquiries to the National Measurement Office should be made via its online enquiries system, or by phoning 020 8943 7227, or submitting enquiries in writing to:
NMO Enforcement Authority