Net zero construction: do building regulations apply when retrofitting UK homes?

Improving the heating and energy performance of UK building stock is an important part of reaching decarbonisation targets. But what do developers and contractors need to consider when undertaking retrofitting works to achieve these efficiencies?

Net zero infrastructure and moving to low carbon heating systems

The poor energy performance of large swathes of UK housing stock presents a number of challenges to reaching net zero targets.

A government report published on 3 February 2022 estimated that there are 29 million existing homes that need to be upgraded to low carbon heating systems by 2050. This is to be considered together with a report published by Green Alliance, an independent think tank and charity, which stated that UK homes are some of the worst insulated and least energy efficient in Europe, with only 15% of current housing stock having being built after 1990. A further recent study undertaken by EDF in partnership with Sprift also indicated that the insulation installed in the UK's current housing stock is on average at least 46 years old and in need of urgent updating.

There will need to be substantial retrofitting to the UK's housing stock to bring heating and energy efficiency levels up to standard and to enable the UK to meet its net zero targets.

We recently explored in our Insight what measures the UK government is taking to tackle the problem of operational carbon in the built environment. This highlighted that the heating and powering of buildings accounts for 40% of the UK's total energy usage, and that the government has implemented changes to the Building Regulations, including amendments to Part L, which came into force on 15 June 2022.

But what does this mean on the ground for contractors and developers in terms of carrying out retrofitting projects?

Building regulations

The Building Regulations 2010 apply in England and Wales to "building work" carried out on all types of building (whether domestic, commercial or industrial). Building work will, for example, include the erection, extension or material alteration of a building. The extent to which the requirements must be complied with will, however, depend on the type of building and the works that are being carried out.

The regulations generally state that any works must comply with the applicable requirements set out in the regulations. Where works are being undertaken to an existing building which does not comply with current requirements, the regulations state that, once the works are completed, the building must not be any more unsatisfactory in relation to that requirement than before the work was carried out.

While applying the regulations is fairly straightforward when it comes to building new homes, contractors and developers will need to be mindful of certain obligations imposed when it comes to retrofitting.

For instance, Regulation 23 generally provides that where a thermal element (a wall, floor or roof that separates a space which is subject to the application of heating or cooling (a conditioned space), from the external environment, an unconditioned part of the building or a particular type of extension) is renovated or replaced; that work shall be carried out to ensure the whole thermal element complies with Part L of the regulations. Renovation in this context means the provision of a new layer or replacement of an existing layer in the thermal element, excluding decorative finishes.

Part L of the regulations, broadly state that reasonable provision shall be made for the conservation of fuel and power in buildings by: (i) limiting heat gains and losses through thermal elements and other parts of the building fabric; and (ii) providing fixed building services (such as heating) that are energy efficient and have effective controls.

Retrofitting the UK's housing stock and new Approved Document L

What does the renovation or replacement of a thermal element in accordance with Part L look like practically?

Approved Documents give practical guidance on common building situations and how to meet the requirements of the regulations. Pages 67 and 68 of Approved Document L - Volume 1 specifically provide guidance on how Part L of the regulations can be achieved with respect to work on thermal elements in existing dwellings.

The document narrows the scope of renovations to thermal elements to:

• Providing a new layer through cladding or rendering the external surface of a thermal element;
• Providing a new layer through dry-lining the internal surface a thermal element;
• Replacing an existing layer by stripping down the element to expose basic structural components and then rebuilding;
• Replacing the waterproof membrane on a flat roof; or
• Providing cavity wall insulation.

It further provides that where more than 50% of an individual thermal element (that is, 50% of a single internal or external wall, floor or roof) is being renovated, or where work is carried out to more than 25% of the surface area of the entire external building envelope (the walls, floor, roof, windows, doors, roof windows and rooflights of the building), then the work shall be carried out so that the whole of the thermal element achieves the performance criteria set out in the document.

Developers and contractors will therefore need to be mindful of the extent of the works being undertaken. What may seem like a limited piece of work renovating a thermal element, may inadvertently become a larger piece of work due to the necessity to renovate the whole of a thermal element to satisfy the regulations. This will naturally lead to increased costs (in respect of materials and the length of time taken to complete the retrofitting project).

In addition to the above, the latest revisions to Approved Document L introduce new fabric efficiency standards that should be achieved when thermal elements are renovated or replaced in existing homes as part of a drive to improve energy efficiency in UK homes. Developers and contractors will therefore also have to consider whether any retrofit projects have been adequately designed to meet the expected standards.

Fitness for purpose

While a contractor may be instructed to carry out work to a certain physical specification, many contracts will also require the works to be carried out in line with the regulations and any applicable law as at the date of the contract.

A significant reason for many retrofit projects will be to ensure that a building achieves a desired level of thermal efficiency, carbon output and/or whole-life cost. It is perhaps inevitable that many retrofit contracts will be peppered with (potentially uninsurable) "fitness for purpose" obligations. This is because a fitness for purpose obligation imposes duties on the contractor that go beyond any duty to exercise reasonable skill and care in carrying out the works, in that the contractor will also be obliged to achieve an end performance result. In the context of an instruction to comply with new Approved Document L (or other guidance), this may mean the contractor will have to complete the works so that dwelling achieves a relevant minimum efficiency standard for the renovated or replaced thermal element.

The case of MT Højgaard v E.ON is a reminder (as discussed in our Insight) of the dangers of the requirements to achieve an ongoing performance result, and not just the completion of the construction work itself.

Osborne Clarke comment

When undertaking retrofit projects, parties to construction contracts will need to consider (and properly document) the intended outcome of the work, how the parties are going to meet the regulations, what obligations are to be imposed on each other, and ensure that any design obligations are appropriately allocated.

Disputes can commonly arise where parties accidently omit performance and/or output specifications. This can include failing to agree how the works can demonstrate compliance with the regulations. The parties should ensure they understand each other's position when entering into a contract and identify the routes to showing compliance with any relevant regulations (either by setting this out in the contract itself, or in any underlying contract documents).

If the contract is ambiguous about certain performance or output specifications, it may still be possible for the contractor to show that the works comply with Part L of the regulations by means other than Approved Document L. While the Approved Documents provide guidance on how to comply with the regulations, the criteria contained in the document may not always be suitable and there may be other, more appropriate ways to comply with the regulations dependent on the needs of the project. Differences can still arise, in that the contractor may, for example, show compliance with Part L by means other than Approved Document L, but fail to achieve the design intent of the project thereby giving rise to a dispute; hence why there can be a benefit in confirming and clarifying any performance or output specifications.

Consideration may also need to be given to the capabilities of the parties' workforce. As we continue to see labour shortages, a shift to more carbon-friendly technologies and an increasing use of modern methods of construction, there may be a requirement for developers and contractors to upskill their staff to ensure retrofit projects are being completed in a timely manner, with appropriate skill and care.