Which Political Party Is Most Likely to Help Drive a Greener Property Sector after the UK Election?

Sunday, May 3, 2015

On May 7 the UK is voting for its next government. It looks likely that no single party will win an overall majority, meaning that the two largest parties will, once again, need to seek coalition partners to form a government. Alongside a complicated domestic political environment, Britain’s relationship with the EU continues to look shaky and ambiguous. So what does this mean for sustainability and real estate?

In my view, Britain’s relationship with Europe is key to its credibility on green issues. By ‘green’ I mean the broader spectrum of sustainability including its social and governance aspects. This is not about energy, and policies that ignore the interrelation between good environmental and energy management and overall good stewardship of a business, will not be effective. Since the 1970s the EU has been a leader in environmental policy making. It legislates on a wide variety of topics from energy efficiency to habitats, planning laws, protection of wildlife and construction products. It has developed long-term environmental targets and is a leading regional voice in international climate negotiations. For their part, EU members recognize that environmental issues cannot be solved by domestic governments working alone and have been willing to delegate power to the Commission on environmental issues.

I recently participated in a panel that discussed the political parties and their ability to drive a greener property sector in the UK. My sense was that our panel was concerned by an overall lack of long-term strategy visible in the three main political parties’ agendas and my view is that this extends to the parties' view on Europe. The way in which the UK continues to engage with Europe is crucial to the success of sustainability initiatives in the real estate sector. I recognize concerns regarding national and EU legislators’ involvement in developing acronym-laden legislation that increases the real estate sector's reporting and management burdens. However, property is a regulated sector. In the same way that it must engage with national governments in effective and robust consultations on legislation, the national government must engage effectively with EU law and policy makers.

The danger in not doing so is legislation that is not fit for purpose across all member states. Some years ago, a group of academic lawyers undertook a project to draft common principles for European private law. The outcome of the project is the Draft Common Frame of Reference (or DCFR), a set of books that set out legal principles intended to apply across EU member states. To date, the focus of the project has been contracts, leases of goods, contracts for services, commercial agency, franchise, loans and personal security. However, the DCFR has been referred to in Scottish legal proceedings related to a contract for sale of land and is intended to be used as a basis for EU law making e.g. the Common European Sales Law.  Ultimately, it is a project for harmonization of European private law.in the EU.

Property law (sometimes described in other European systems as immoveable property) is site specific, and is at least partly excluded from EU competence. On that basis, it is easy to dismiss the involvement of European Law in property as a side issue. However, there are areas of law touching on property law where European law is gaining more influence. The Mortgage Credit Directive, on credit agreements for consumers relating to residential property is one example. The relationship between the EU’s sustainability, environmental, and energy efficiency agendas and domestic property law systems is another. In some ways, we can say that we are moving towards a European property law.

The majority of lawyers working on the DCFR come from continental European legal traditions. There has to date been much less involvement from lawyers from England and Wales. What does this mean for property law in England and Wales and the interrelation between the EU’s environmental and sustainability agenda and the UK’s real estate industry? In the case of the DCFR, it means that the principles are strongly linked with continental European legal traditions.

In my view, there is a real risk that any political party that distances itself from EU law and policy making (including withdrawal from the EU) will end up being forced to implement legislation that does not take into account England’s property law system, which differs markedly from that of other member states. There is a lengthy process in developing and implementing legislation at the EU level and from there integrating it into member states’ national laws. The process demands constant and committed engagement. A 2017 in/out referendum would necessarily cause a great deal of uncertainty in the interim and would leave national law and policy makers in a limbo, unable to engage effectively with their European Commission counterparts.

My strong sense is that the UK real estate sector craves long-term strategic thinking and some certainty in the direction in which legislation will develop. Lack of engagement with European law-making on environmental, energy efficiency and sustainability issues will only exacerbate this uncertainty and make the European regulatory environment extremely difficult to navigate over the coming five years.