BUILT ENVIRONMENT
Legal
LAW AND
DISORDER
Offices, warehouses and other commercial buildings account for much of the UK’s
GREEN
carbon emissions. But unless there is major legislative overhaul things won’t get any
BUILDINGS
SPECIAL
better. Adrian Phillips examines the legal issues that impact on – and stymie – green
initiatives and explains why the only answer is a fairer, binding framework
C
ommercial buildings are significant and Greenback Freeholders. A Green long, long view – if we do not deal with CO
2
emitters of CO
2
into the atmosphere. Freeholder will look at the cost of any green emissions, there will not be a future for our
They and residential buildings account initiatives, but might be prepared to sustain a company, and there will not be any returns for
for 39% of the emissions arising from the US more long-term view of the payback period. shareholders at all? Watch this space!
– and the London Development Agency says However, the directors will need to consider For the Greenback Freeholder, the return
that commercial buildings account for one- their duties under the Companies Act 2006. If on investment will be key. If the return on an
third of London’s CO
2
emissions. they simply spend money on uneconomical investment is not good enough, then it is high-
How can commercial buildings be made green measures that save little carbon but cost ly unlikely that green technologies will be
greener? In addition to solar panels and wind a lot of money, they might ultimately have adopted. Here, looking at the Companies Act
turbines, recent ideas include painting the out- some grumpy shareholders on their hands. 2006 the other way round, could one argue
side white to reflect heat (and so reduce air The Companies Act 2006, in a fudging sort of that the directors are failing to have regard to
conditioning costs), tubes to grow algae on the a way, gives the directors some cover. the “community and the environment”, and
outside, or implementing smart appliance Previously, a director’s main duty was to his or, indeed, the long term interests of share-
technology, which intelligently controls appli- shareholders. The Companies Act 2006 reiter- holders as the inhabitants of Planet Earth.
ances within the building to maximise efficien- ates this, but says that directors, in promoting So, the Companies Act 2006 was a half-
cy across the whole grid. “the success of the company for the benefit of hearted attempt to make directors look
Installation of green technologies in a com- beyond the focus on profit for the sharehold-
mercial context differs significantly from their ers, and at a wider range of issues, such as
use domestically. Most domestic houses are
freehold and so it is simply a decision for the
owners of the building as to whether they
want to install green technology. Some people
‘
The current Victorian landlord
creditors, suppliers, employees, the communi-
and tenant law is not at all
ty and the environment. But we have over 200
conducive to a common effort to years of the limited liability company being
reduce carbon emissions from
focused on profit generation. My view is that
are driven by the investment potential, while the current situation is a fudge, and is unlikely
others by more altruistic motives.
However, many buildings in the commer-
cial property sector are owned by commercial
’
commercial property to lead to any real, legal impetus for change for
the Greenback Freeholder.
its members” must “have regard to, amongst Then there are the landlords of buildings
landlords and rented out to commercial ten- other matters...the impact of the company’s that are tenanted out. Again, you could sub-
ants. And the law that created the “standard” operations on the community and the envi- divide these into two types: the Green
leases used in England and Wales dates back to ronment”. What this really means, and Landlord and the Greenback Landlord.
Victorian times. Alongside the Victorian whether this is just a nod in the direction of The Green Landlord is in a different posi-
Companies Acts, whose basic principles are the environment or whether a director could tion to the Green Freeholder. Depending on
still reflected in our Companies Act 2006, argue that environmental concerns are equal the lease, the Green Landlord may be able to
these laws are more to do with the protection to shareholder returns, is unclear. put in place environmental improvements that
of private property and the maximisation of Alternatively, directors will argue that cut CO
2
emissions and may be able to pass the
profit than any wider social issues. Current implementing green technologies will raise the costs on to the tenant. Service charge provi-
initiatives rely on landlord and tenant working company’s attractiveness to potential cus- sions of leases generally provide for the main-
together to put in place green initiatives. tomers and therefore increase business. tenance of the property, and they may also
We understand that some shareholder provide for additions at the landlord’s discre-
The Freeholder activists are looking to buy shares to get just tion and/or in the interests of good estate
When a company owns its own building, then this sort of issue on the table at general meet- management.
I sub-divide owners into Green Freeholders ings. For example, should directors take the Often, if a landlord improves a property, the
32 November/December 2009 ❘ Sustainable Business
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