Happy Christmas! Advent calendar no 7
Behind the door is…
Minimum energy efficiency standards are coming!
Did you know that from 1st April 2018, it will be unlawful for landlords to grant a lease extension, renewal or new lease for business and residential properties that do not reach a Minimum Energy Efficiency Standard – an EPC rating of E or above? Plan now to achieve the minimum energy standard in the most cost-effective. least intrusive way.
From 1st April 2018, it will be unlawful to rent out business or residential property that does not reach a Minimum Energy Efficiency Standard (MEES), due to changes to the Energy Act 2011.
Energy Performance Certificates (EPC) rate the energy efficiency of a building, from ‘A’ to ‘G’ rating (with ‘A’ being the most efficient). Landlords will be required to have an EPC with an ‘E’ rating or higher to be able to issue a new lease, lease extension or renewal.
The regulations apply to all privately rented properties in England and Wales that require an EPC. Buildings with ratings of ‘F’ or ‘G’ will require mandatory improvements to be made before lease signing, extension or any sub-lettings.
These changes apply to any commercial privately rented property which has an EPC, or is required to have an EPC; or is within a larger unit which is required to have an EPC. An EPC must be recertified every 10 years. After 1 April 2023, landlords must not continue to let any buildings which have an EPC rating of less than an ‘E’ rating.
What are the implications for landlords?
It is estimated that 20% of non-domestic properties could be ‘F’ and ‘G’ rated. These properties may become less attractive to tenants than more energy efficient alternatives, affecting the marketability and value of the property. The brand reputation of landlords holding the lower rated stock also may become diminished.
A property could be exempt if it is not required to have an EPC (under the Energy Performance of Buildings Directive 2007); or:
- Improvement measures could damage the building or would not be cost effective within a seven year payback;
- An expert states that measures will reduce the property value by 5% or more;
- Consent cannot be gained for the measures from a third party (such as a lender or current tenant).
All exemptions must be recorded on the public “Exemptions Register” and last for five years only.
It is the landlord’s responsibility to demonstrate compliance. Non-compliance is penalised with fines from £5,000 to £50,000 for a rental period of up to three months, and up to £150,000 for longer periods. Submission of misleading or false information may incur a fixed fine.
Why act now?
Landlords will need to improve their properties’ performance until an EPC ‘E’ rating or above is achieved.
Acting strategically to future-proof building stock will avoid last minute and ad hoc measures. Landlords should plan to:
- Carry out energy assessments to check whether the EPC ratings are correct;
- Identify synergies between improvement measures;
- Undertake the most cost-effective interventions, in the least intrusive manner for occupants.
How can Eight Associates help?
Our expertise in providing portfolio-wide carbon and energy-saving advice means we work with you to realise the synergies that ensure cost-effective compliance within the required timescale. We will:
- Conduct energy assessments and up-to-date EPCs;
- Advise on the upgrades available, with informed pay-back calculations;
- Devise the most cost-effective energy efficiency strategy to close the gap;
- Verify improvement works and provide new EPCs to demonstrate compliance.