The Carbon Reduction Commitment (CRC) scheme has been amended as part of the Treasury spending review, but it remains a highly complex topic and one which poses potential problems for both Ls and Ts. 


The starting point is that companies which use more than c£500,000 worth of electricity in a year have to register and are then potentially liable for additional payments. Against that, they were originally entitled to offset recycling payments, which would then significantly reduce the overall cost of CRC. However, those recycling payments were abolished in the spending review, and the end result is likely to be that CRC payments become far larger – and therefore potentially more important to Ls and Ts. 


Part of the problem is that the £500,000 figure applies to all companies that are under common ownership, control or management. Thus, a private equity house may hold a portfolio of businesses which run on largely independent lines, but under CRC the equity house – and all its businesses – will be treated as a single organisation. Accordingly, the fact that L is part of a larger group may make a significant difference in L’s (and therefore T’s) potential liabilities. The removal of recycling payments makes those concerns even more pressing. 


Currently, well-drafted leases will contain a clause allowing L to recover taxes, outgoings and charges relating to the property. With the abolition of the recycling payments, CRC is now more akin to a tax than before, and it is certainly a charge. Having said that, CRC is levied on the organisation – rather than the building, so any clause which only covers costs relating to T’s property will be vulnerable to challenge. Needless to say, some Ls are now considering the inclusion of suitable wording in new leases (sometimes within the outgoings clause, whilst on other occasions within the service charge provisions, or perhaps with a standalone clause). From T’s point of view, the simplest approach is to now insist on a clause stating that T will not be liable under the lease for any CRC costs incurred by L pursuant to the CRC scheme. 


It seems to be universally agreed that the CRC scheme is still too complicated and the government has promised further changes. Accordingly, some advisers may prefer to adopt a ‘wait and see’ approach, but T’s advisers are surely best advised to insist that there is clear documentation recording that T will not be liable for any CRC costs. See [2010] 261 PLJ 6.