7 June 2017 | Herpreet Kaur Grewal
Property landlords have to find ways to improve energy efficiency of their properties by 1 April next year otherwise they may be unable to let their less energy-efficient properties and could incur penalties of up to £150,000.
This is because the Minimum Energy Efficiency Standards Regulations come into force on 1 April 2018.
Under the new regulations, subject to a few exceptions, private sector landlords of properties will not be able to grant new leases of properties to new or existing tenants with an Energy Performance Certificate (EPC) band rating of F or G. These account for about 18 per cent of non-domestic properties, according to government statistics.
Commercial property specialist Liz Brady, a partner at South-East law firm Furley Page, said: "Prudent landlords should be preparing for the change now."
She added: "EPCs last for 10 years and were first carried out in 2008. Those early EPCs are due for renewal on new lettings in 2018. Landlords may well consider that they are 'safe' from the penalties of the new regulations as their early EPCs showed a band rating of D or E so they may expect any renewed EPC to be similar, provided no negative alterations to the building have been made in the intervening years.
"This may be so, but properties with original band ratings of D or E (accounting for about 47 per cent of all such properties) are at risk. The EPC rating could fall to bands F or G on a new inspection as the software used for assessment has increased in its accuracy, and the Building Regulations on efficiency have become more rigorous.
"Because of this risk, some prudent landlords are actively reviewing their property portfolios and having energy assessments carried out now (but not necessarily registered) and where improved ratings are needed, they are carrying out the works to improve the energy efficiency of their properties and hence those ratings and then having them reassessed."
Landlords are also inserting covenants in their new leases imposing obligations on the tenant not to do anything to diminish the EPC ratings of the properties. Landlords cannot try to impose the liability on tenants under the general provisions already standard in leases and recover costs via a service charge (justified as improvements required under legislation), as the regulations do not impose any positive obligations on the landlord to improve the energy efficiency of buildings; the regulations just prohibit certain properties being let.