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Commercial property EPC changes and your guide to being prepared

In 2012 we saw changes by way of the Energy Act 2011.  The most significant change that came out of this was the proposed minimum energy standards requirements.

There are proposed legislative changes due to take effect in April 2018 that may affect both residential and commercial property owners and occupiers.  These changes will make it unlawful to let residential or commercial properties that have an energy rating less than E.  If the property is rated F or G the Landlord/Owner will need to improve the rating before letting it out.

There are significant implications that landlords need to consider now, to ensure they are not affected by these changes.  Tenants who are also looking to assign or sublet their properties should also consider these implications.

So what are the implications?

•  Unless a property is upgraded to satisfy the minimum standards it would be impossible to market the property.  A recent review of unpublished data on energy performance of existing public buildings requested under the Freedom of Information Act found that one in six public buildings that have been through an energy audit to obtain display energy certificates received the lowest possible energy efficiency rating.

•  At this stage it is unclear as to exactly what transactional dealings with property will trigger the minimum standard requirement; however it could apply to all lettings, sub-lettings and assignments.

•  Values of commercial properties can be affected if they are not upgraded to meet the minimum standard.  The effect on marketability will have a knock on effect on the value of the property.

•  There is suggestion that commercial properties with rent reviews due may be affected by these changes.

•  There may be implications for dilapidation assessments.

With the variety of implications it is important landlords and occupiers gather a full understanding of the energy efficiency of the property
in question.

What should Landlords and Occupiers do?

•  Understand the current energy efficiency rating of the property.

•  Ensure all rentable property has an EPC Assessment including Commercial property.

•  Assess what costs are involved to undertake works to bring the building into a higher energy efficiency rating, bearing in mind the value it may add to your property.

•  Review when void periods are likely, to factor in for upgrading the property’s energy rating.  These can be periods when the property is likely to not be in use, these repairs can also be factored into scheduled repair and maintenance programmes.

•  Look at the possibility of utilising the Green Deal finance route.

It would be best practice for the prudent landlord to take action sooner rather than later to review their property portfolios’ EPC ratings so that arrangements can be put in hand between now and April 2018 to comply with the proposed minimum energy standard requirements under the Energy Act 2011.

Although 2018 seems a long way off it is important to plan in advance to be prepared and plan for any necessary work.

For further advice contact Aman Sandhu at a.sandhu@gullands.com