EPCs, or Energy Performance Certificates, are used for commercial and residential properties. They set out the efficiency rating of a building on a scale from A (the most efficient) to G (the least efficient). The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 will have a major impact on the letting of properties with poor EPC ratings. From 1 April 2018 it will be unlawful for a landlord to let properties with an EPC rating of F or G, which are the 2 lowest grades of energy efficiency. This would apply unless the landlords have implemented the maximum package of works as required by the regulations in order to improve a property's energy efficiency. This could apply to tenants who sublet space; however it does not apply to leases granted for a term of 99 years or more, or generally to leases granted for 6 months or less. For commercial properties, where it is estimated that approximately 18% of non-domestic property could fall into this category, these regulations clearly pose major issues: -
- It is likely that the sub-standard level of efficiency defined in the legislation will change in the future, whether in terms of the letter or the energy efficiency required to meet a particular level. For landlords with properties on the D or E asset rating borderline this will be worth keeping an eye on.
- The marketability of some commercial properties will be greatly affected. Indeed they would be impossible to let unless they were upgraded to meet the legislation's minimum standards. This would be likely have a knock-on effect on a property's overall valuation.
- Rent reviews for properties affected by the regulations could be utilised against the landlord's favour.
Non-compliance with the regulations could lead to a financial penalty, together with a publication penalty if the breach is committed by a corporate body. Ahead of the application of the regulations, landlords can start to take steps to minimise the impact of the changes and the risk posed to their portfolio. This could include making sure that all its rentable property has an EPC in place, taking steps to ensure that it meets the minimum requirements and to improve the energy efficiency of the property. For more information on EPCs and commercial property matters, please contact Tom Weightman on 0114 224 2168 or [email protected].
