Level five water restrictions and the impact on commercial properties

On 3rd September 2017, the Mayor of Cape Town, Patricia de Lille, announced the enforcement of level five water restrictions in order to further curb water usage in the Mother City. 

The rainy season has failed to deliver sufficient rainfall so far, and the levels of the the dams are at an extremely low volume of 35%. “While usage within the residential and industrial categories seems to have reduced considerably, the City of Cape Town has stated that the commercial property category, which includes offices and small businesses, has not followed suit,” says Leon Breytenbach, National Manager of the Rawson Property Group’s commercial division.

A frightening statistic

The City of Cape Town’s Water and Sanitation Department connects 8,500 new connections to the water grid each year. Not all of these are residential connections. If they were, and each connection complied with the 20 kilolitre residential water restriction, the City would need to ensure the supply of an extra 2 billion litres of water per annum, to supply water to the new connections alone.“Add to this, the current drought and resulting water crisis - if the existing users, together with all the new connections, fail to reduce their current water consumption, the water supply will remain under pressure going forward,” explains Breytenbach.

The City of Cape Town further estimates that businesses, industries and organisations currently use 24% of all the water, while 70% of the water is utilised by the residential sector. Although the commercial property sector uses far less water than the residential sector, the commercial property sector still has a role to play during the current water crisis.

The impact on commercial properties

“With immediate effect, the commercial property owners, together with managers of commercial properties, must ensure that the monthly usage of municipal water is reduced by at least 20% in comparison with the billed figure of one year ago,” states Breytenbach. Failing to comply with this requirement could cause the perpetrator to incur a hefty fine, probably between R5,000 and R10,000.

Owners and managers of commercial properties are already under pressure to keep the property’s operating costs down, and so ensure the profitability of the property investment. With the recent increases to water and electricity tariffs, fines are an unnecessary cost which should be avoided at all times.

The City of Cape Town has confirmed that they do not want to negatively impact current business operations, but it also seems to accept the key role it has in positively impacting current mind-sets, and stimulating the required behavioural changes in order to adapt to the current water crisis.

Who pays the fines?

A standard lease agreement will usually have a clause whereby a  tenant is held liable for the cost incurred as a result of using water on the premises. Any increases in the cost of water usage, or as a result of increased tariffs, can then be passed onto the tenant.

A fine, however,  is given to the commercial property owner under the Level 5 water restrictions, thereby making it quite different. The tenant could argue that the property itself is not water wise; that they as tenant were willing but unable to improve the property without the consent of the landlord and that it was the landlord’s obligation as commercial property owner or manager to ensure that improvements were effected, making sure it was sufficiently water wise to avoid the potential of a fine being issued. There could arguably be reasonable grounds for the fine to be split between the landlord as commercial property owner or manager, and the tenant whose failure to reduce their water usage resulted in the fine.

“Lease agreements need to specifically provide for the circumstances under which fines can be passed on to the tenant, before a tenant can reasonably be held liable for the fine incurred,” Breytenbach advises.

Not all commercial properties are ‘bad”

“The commercial property sector has been the frontrunner when it comes to water, electricity and waste disposal savings, in new and existing commercial buildings. Many companies which own large commercial property portfolios, have all undertaken large-scale retrofit initiatives, to reduce the potential negative impact commercial properties could potentially have on the environment. Many of these initiatives were already in place well before the electricity crisis occurred, and we can be grateful that these initiatives are in place now that the water crises has surfaced” says Breytenbach. To improve on these existing initiatives and reduce the water usage by a further 20% is going to be difficult. The are, however, still many commercial property owners who have ignored the benefits these initiatives bring, and delayed in implementing these for too long.

Benefits of going green

The City has confirmed that they will take existing water saving initiatives into account, should enforcement measures be considered against commercial property owners and managers of commercial properties. While this is comforting to know, there are far more benefits linked to water, electricity and waste disposal saving initiatives, than the avoidance of a level 5 water restriction.

“According to the IPD SA Annual Green Property Indicators, buildings which are efficient in water and energy usage provide a significantly higher return than those which are less environmentally friendly. These buildings show a higher capital growth due to the improved occupancy rates, in addition to a better net income growth,” says Breytenbach.

The City has provided guidelines as well as an online water usage calculator to aid in assessing potential water usage. Water accounts over the past few months, should also be checked, to calculate the average consumption, as this will give an idea of what adjustments may be required in order to remain within the permitted limit.

“While the City of Cape Town is doing everything possible to ensure that there is water in the taps until the next rainy season, it is the duty of all who live and work in Cape Town to do their share in reducing water usage, including the commercial property sector” advises Breytenbach. 

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