From 01 April 2018, it will be unlawful to let residential or business premises in England and Wales which achieve an Energy Performance Certificate (EPC) rating below Grade E. Yet many landlords still haven’t found out whether their energy levels will be letting them down.
If you are a landlord whose rental property portfolio interests only have Listed Building designation or you are confident you can make a compelling case that improvements to increase the energy performance of your property to let to meet next year’s mandatory EPC Grade E would devalue the property, then you have no need to read further.
If, however, you are a landlord in possession of business premises to let but are unsure whether or not they are part of the estimated 18 per cent of commercial properties nationwide that are below energy performance rating E, then read on…..
It was 2011 when the Energy Act was passed in the Houses of Parliament. Subsequently, the ( Minimum Energy Efficiency Standards (MEES) Regulations of 2015 confirmed that properties with an EPC rating of F or G are considered sub-standard and will be regarded as unlawful to let in 12 months’ time.
By the time of enforcement, there will have been seven years notice of the need for compliance with the MEES regulations. Yet in our experience in our regional patch, there remains a significant number of properties where commercial landlords with business premises have not obtained EPCs.
In all likelihood this is because these landlords have been fortunate enough to have retained tenants in-situ for a long period because, with a few narrow exceptions, from October 2008 all commercial premises have been required to have an EPC by an accredited assessor at the point letting, sale or completed construction. In fact, for a number of years, property agents have had to comply with the ruling that an EPC rating must be included at the point of marketing or advertising any built property to let or for sale.
Energy Performance Certificate
An EPC is an asset rating and it is, therefore, the building’s fabric and services which are assessed rather than the use of the property by any incumbent or potential occupier.
While it might be the case that the older the building the more likely it is that it would be below the MEES regulations, it does not necessarily follow that because it was built, say, post-1980 or even in the 1990s that it will meet the minimum E level of energy performance. Nothing should be taking for granted when property is an income or investment asset.
Landlords not in possession of an up-to-date EPC are advised to obtain an assessment in good time. The more supporting information a landlord is able to make available to an accredited energy assessor, the more informed – and so more accurate – the EPC produced will be.
If information on the lighting, insulation and heating systems etc is not supplied the assessor will make assumptions based on the default values in the official energy rating methodology and guidance. This can lead to wide variations between virtually identical buildings simply due to the availability of information or otherwise.
Where a property is suspected of having a low EPC rating it would also be worthwhile for commercial property landlords to seek a pre-assessment survey. Qualified building surveyors can advise about energy saving methods, maintenance and works such as installation of controls to heating and hot water systems, replacement lighting, refitting or replacement windows or other low or zero carbon technologies.
The considered view is that as we fast approach the 01 April 2018 deadline, it is likely that commercial property values and marketability of business premises could be adversely affected due to the inability to re-let a poor performing property where it is held as an investment.
There is no current intention to prohibit selling freehold commercial property with vacant possession where it ranks below E on an EPC but we do live in times of change so this policy position cannot be guaranteed in perpetuity.