Something in the Air?

13 December, 2012

The news that from 1 January 2015 repairs to air conditioning systems using the common refrigerant R22 will be unlawful, is set to cause a chill in landlord and tenant relationships as disputes arise over who should be responsible for and fund the necessary works.

In 2004 EU Regulation 2037/2000 (replaced by European Regulation 1005/2009) (the “Regulations”) made the use of R22 gas in new air-conditioning systems illegal and from 1 January 2010 the use of new R22 gas when carrying out maintenance on air-conditioning was made illegal.

The next step of this phase out will commence in 2015 when the Regulations will mean that the use of recycled R22 when carrying out maintenance on air-conditioning will also be illegal. Therefore, from 1 January 2015, although it will not be illegal to continue to use a system that contains R22, if that system fails and requires any maintenance that would involve decanting or replenishing the R22 gas, the repairs will be illegal and consequently many systems will need to be replaced.

So who is responsible for these works and who should pay for them? Well that all depends on the specific wording of the lease but in most cases, unless the tenant has a full repairing lease of the whole building, the landlord will be responsible for any repairs/replacement needed but will (most likely) recover the cost of doing so via the service charge.

However, landlords in this position are still unlikely to recover all of their costs as existing tenants, particularly those with only a few years of their terms remaining, should be wary of large service charge increases to cover replacement works and should look at the terms of their lease carefully to establish whether this cost can be included and if so what proportion of it, considering the length of the term remaining.

Tenants entering into new leases need to be careful that they are not paying a premium rent and taking on the responsibility and cost of replacing a R22 system before 2015 and those coming to the end of a lease need to ensure that they have complied with their repairing covenant fully, particularly if exercising a break clause where compliance is a condition. The cost of replacing R22 systems is likely to be a key area of dispute when dealing with dilapidations claims/settlements over the next couple of years. Tenants should be wary of, whilst Landlords should hope for, wording such as it is the tenant’s responsibility not just to repair equipment but to ‘maintain’, ‘service and keep up to date’ or keep it in ‘good working order’.

It is now the best time of the year to carry out repairs on air-conditioning systems as they are unlikely to be in high demand in the cold weather so if you are a Landlord or Tenant in a building that uses a R22 system we recommend that you instruct an engineer to advise on whether partial or total replacement is required, read through the terms of your lease carefully and start considering replacement works today!