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Blog: New requirements for R22 (Refrigerant Gas). By Katherine Ekers21st June 2013

Katherine Ekers

Until recently, the most I had ever thought about air-conditioning was during a desperate search for the most refrigerated shop on an extremely humid holiday. I certainly hadn't given a second thought to what is inside the units that magically "condition" air. However, over the past six months it has gradually intruded more and more into my consciousness and air conditioning is now something that everybody involved in the commercial property industry should bear in mind.

The first air-conditioning units originated in ancient Egypt and consisted of wet reeds being hung in windows. Modern technology developed this idea over the intervening 3,000 years and the first air-conditioning units, as we would recognise them, used highly toxic and/or flammable gases and refrigerants for cooling agents.

Unsurprisingly, this resulted in some nasty accidents and in 1928 Thomas Midgley Jr was hailed as a bit of an air-conditioning genius when he created the first non-flammable, non-toxic hydrochlorofluorocarbon refrigerant (then given the trademark name Freon but more commonly known now as R22). Since then R22 has been widely used in air-conditioning units for nearly 80 years. However, the gases involved are ozone-depleting and contribute significantly to global warming. Hence, if we continue such use then there will be a significant environmental impact.

As part of the UK's commitment to reducing global warming, since 1 January 2010 only recycled R22 can be used to service or maintain existing air-con systems, subject to certain conditions.

From 1 January 2015 this will be stepped up a gear and there will be a wholesale ban on maintaining R22 refrigerant so that, where servicing is required to any plant using R22, the refrigerant and/or the whole system will need to be replaced.  All air-conditioning systems do leak or lose refrigerant over time and so essentially this means that any system which currently uses R22 will need to have the entire refrigerant stock or the whole air-conditioning system replaced within the not too distant future.

This statutory requirement will have a massive impact on both landlords and tenants both once it comes into force and in the intervening period.

Tenants taking a new lease will be wary of incurring potentially significant costs to replace the air-conditioning system and will want to ensure that the cost of any necessary replacement works is excluded from their repairing liability and, just as importantly, from the service charge provisions. They will want the landlord to retain responsibility for, and to bear the cost of, carrying out the replacements, and to limit the potential disturbance that any works might incur.

On the other side of the fence, landlords will be concerned that their service charge provisions are wide enough to cover the cost of replacement of the air-condition system (bearing in mind that it may arguably not be beyond economic repair and its replacement will only be required by statute from 1 January 2015, which could cause problems for a landlord wanting to carry out works in 2014). Service charge caps (negotiated before such replacement was ever envisaged) may also limit recoverability of costs. Tenants whose leases expire in 2015 or shortly thereafter and who pay "a fair and reasonable" proportion of costs will no doubt argue that their contribution should be limited due to the extent of use they will be able to make of the new system.

On a practical level, converting the existing equipment so it can operate with an acceptable alternative gas might seem like the easiest and most cost-effective option but ultimately could be less efficient, could compromise the system and the enforceability of any warranties and lead to higher energy costs.

A purchaser of a building where replacement of the air-conditioning system will be required needs to investigate, prior to purchase, the potential costs of this and whether (and to what extent) they are recoverable from tenants.

Two final points to bear in mind are that tenants with a clear liability for the cost of system modification or replacement might argue on rent review that the new rent should be discounted to reflect such liability. R22 claims are also likely to feature more frequently in dilapidations claims as tenants vacating before 1 January 2015 may be advised to do no work to the air-conditioning system as it will need replacement anyway.

To recap – you may not have considered air-conditioning too closely in the past but now is the time to look at the issue in detail whether dealing with a purchase or the grant of a new lease to check whether R22 gas is used and, if so, to have the debate in advance about who should bear the cost and responsibility to replace it.  

About the author

Katherine Ekers qualified as a solicitor in 2011 and is a rising commercial property star at Forsters LLP


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