He does'nt have to do it. But he is quite right in pointing it out and offering to upgrade the installation to bring it up to new regulations. If you refuse then he will still do the work you want him to do, but he will not offer any guarantees as the old pipes, fittings and system can fail at any time and especialy after any work has been done that may disturb the old fittings and pipework. I do not think he is trying to rip you off infact he is concerned and thinking about you and any future problems that may occour that can be avoided now before anything happens, It will cost twice as much to repair and redecorate etc... if it does fail. Prevention is better than cure.