Retrofitting and major works

explainer guide

Clearing the path to a greener future is becoming increasingly important as the Government strives towards a sustainable future. By implementing retrofitting and major works, simple but impactful changes can be made in time for a net zero goal of 2030. On a more personal note, block managers can reduce energy consumption in their buildings, lower carbon emissions and enhance the overall value of their properties. 

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What is Net Zero Retrofitting?

Retrofitting is the process of updating buildings to improve their energy efficiency. 

What does retrofitting involve?

  • Improving insulation in the walls, roof, and floor — these can be added either internally or externally. 
  • Switching from a gas boiler to an electric heat pump — this is a no-carbon alternative which will use less power to heat a property. 
  • Installing solar panels to generate renewable energy — the property can generate its own electricity. 
  • Implementing smart technology — smart sockets and heat recovery systems are good examples of this and will reduce energy waste. 
  • Putting in double glazing and energy-efficient doors — this will keep homes warmer and allow less energy escape. 
  • Improving air sealing — so much heat is lost through the floor if a property has inefficient sealing.

Discover more on heat pumps and their benefits. 

What are the benefits of retrofitting? 

A property which retains heat well is one that has efficient heating systems. Less energy is required to keep warm, which means lower bills. 

The property will emit less carbon dioxide into the atmosphere. 

According to Rightmove, on average, a property moving from an EPC rating of F to C could increase the property's value by 15%. 

Working on improvements to the property, such as double-glazing and air sealing, means it is less likely to be cold and draughty. 

What are the challenges of retrofitting?

Making a property greener can be difficult dependent on what it already has implemented, as well as its existing layout. Retrofitting will be a different experience for each and every property depending on how energy efficient they already are. 

Currently, the average energy efficiency rating is D, which means the UK has a long way to go before its buildings become energy efficient. However, costs are the largest hurdle for property managers to make these much-needed improvements. Many find they can’t justify such costly changes when leaseholders may not reap the benefits and savings from them for five or more years.

The other big barrier is that most block managers don’t know which improvements they should start with. There are so many options on offer that it can be confusing.

 

How much does retrofitting cost?

This can vary massively depending on the property and circumstances.

 

What are major works?

Major works are non-routine repairs and replacements. These can include: 
  • Re-roofing
  • External and internal repairs
  • Lift repairs or renewals
  • Boiler replacements

They will often involve capital expenditure (Capex) on building components that require significant investment. This means there is a statutory requirement, this being Section 20, for consultation with leaseholders before major works are carried out. 

Major works also come with their fair share of communication problems. Managing agents often face challenges in communicating major works to residents, meaning some residents only find out when they receive a Section 20 notice. 

Kevin Marshall, MD at Anderson, Wilde & Harris, explained that forward-thinking managing agents should proactively share these plans with residents to reduce surprises. Regularly updating residents, such as sharing Capex budgets, will help them prepare for future work and avoid any friction. 

He said: "We're finding out what their needs are and we're updating the Capex each year. I think that's the first really simple but critical thing that needs to happen, as far as communications are concerned, to get people to buy into it, so it's less of a shock, and they're more engaged." 

How do reserve funds help major works?

Agents may hold significant reserve funds for their managed assets. For example, ARMA members usually manage £1.5-2 billion in reserves. This is primarily for funding major works. 

Reserve funds can only be collected if allowed by the lease. Industry consultant Nigel Glen said that a discussion with the Ministry of Housing, Communities and Local Government (MHCLG) suggested making it mandatory to calculate these funds. 

An example of this is if a lift replacement costs £60,000 and has a 15-year lifespan, £4,000 needs to be collected annually to fund it. 

Learn more about how to communicate with tenants about reserve funds from our panel discussion.

 

Panel advice

We held a webinar with The Surveyor’s Surveyor Director, Phillipa Burgin, Anderson Wilde & Harris Managing Director, Kevin Marshall, and Emeria’s Nigel Glen. The panel discussed the best ways of dealing with retrofitting and major works. These were the most significant pieces of advice: 

Prioritising costs

The panel discussed the costs of putting up scaffolding and the need to address problems together, rather than leave them to pile up. Kevin explained that the funds often don't exist to put up scaffolding multiple times in the space of a year or so: 

"Sometimes go past blocks where you see a scaffold up to roof level right past lots of disrepair on the front, they're going to come back to it in a year or two years' time, but it all back up again. If that's been properly planned out, they'd have put the scaffold up and had the money to do it in one hit.” 

If scaffolding is being erected for exterior painting, for example, the first consideration should be whether other repairs such as window replacements can be done at the same time to avoid unnecessary costs later. Property managers should assess and consider anything that will need attention within the next five to seven years. 

Property managers should review their property maintenance plan regularly to ensure they are aware of what works should be prioritised and when. This makes it much easier to budget ahead. 

Integrating net zero objectives with planned works

The UK Government's goal is for buildings to achieve net zero emissions by 2050. However, property managers may have bigger, more urgent priorities than adapting their buildings to be more energy-efficient. 

This can be worked around by integrating energy-saving upgrades with planned major works. For example, installing double glazing or wall insulation when the scaffolding is already in place for painting. 

The Government will be reintroducing the minimum EPC rating for landlords in 2030. This is likely to lead to complications in leasehold properties, as many leases restrict or prohibit improvements such as wall cavity insulation, which may be necessary to meet EPC requirements. 

Learn more about EPC ratings with our blog.

 

Phillipa said: "I think the EPC minimum rating of C coming back into force by 2030 is definitely going to wake people up. That's only about two scaffolding rounds away, which isn't much." 

She added: “It's going to be a minefield. I'm interested in seeing how the Government deals with it from a leasehold point of view. You can't just bring in wall insulation if it isn't there already. The classic example would be a flat roof. It is going to have some form of insulation in it, and when it is replaced, there is a legal requirement to bring it up to the current building regulation standard. That isn't classed as an improvement so cancels out. I know that there have been awful problems before where there's been single glazing originally, and it's been upgraded to double glazing because that has counted as an improvement. It's going to be interesting to see how the Government deals with that." 

There is an ongoing discussion about updating leasehold law to enable energy efficiency improvements to be passed on as service charge costs. This could massively benefit property managers and leaseholders as it would mean lower energy bills.

Recognising the importance of reserve funds

Communication with tenants about the need for reserve funds can be challenging—especially so when sudden, large-scale repairs lead to steep service charge increases. 

An effective way to communicate with tenants on this subject is to calculate each tenant's fair share. For example, if a lift replacement costs £60,000 over 15 years, which is £4,000 annually. A property manager could charge a property 10% of this which would come to £400 annually. 

Nigel explained that in the US, reserve funds are categorised by percentage levels which can be linked to property values. In this case, well-funded reserve accounts can increase a property’s sale price by 12.5%, on average, when compared with a poorly-funded reserve. 

He said: “I just found it really interesting that in the United States, people understand the value of a reserve fund that we don't seem to have that over here. I'd love to see if we can actually as managing agents and sales agents to try and figure that one out.” 

Resident engagement is another way to go. Involving tenants in the decision-making process and explaining the long-term benefits of major works will build trust with property managers. This could include cost breakdowns, benefits and timelines for major works, which will avoid resistance and frustration. 
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Want to hear more from our panel? Watch the webinar recording here. 

Final thoughts

Retrofitting and major works are two powerful solutions to addressing the green challenges society is facing today. As well as contributing to a more sustainable future, block managers can also lower operational costs in the long-run and enhance the value of their buildings. 

It is time to embrace these new technologies as the norm so properties can maximise their impact and work with them to transform existing buildings into sustainable properties. 

Are you ready to start your journey to net zero? Fixflo can help. 

 

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