EPC Changes For Commercial Property

Owners of the least energy-efficient buildings in the UK are now unable to let or renew a lease of their property, after changes in the law in April 2018. The updated Energy Performance Certificate (EPC) Regulations now make it illegal to let residential or commercial property with an EPC Rating of “F” or “G” - the lowest grades of energy efficiency.

The amends were made as part of the Government’s aim to reduce total carbon emissions by 80% by 2050 in a bid to tackle climate change. They are set to have far-reaching consequences for property owners who are caught out by the regulations with fines ranging from £2,000 to a possible maximum fine of £150,000.

Here we set out the key points of the new energy rules that you need to know.

What Is An EPC And When Must It Be Provided?

Before a building is put on the market the seller, landlord, managing agent, estate agent and any other third parties must ensure an EPC has been commissioned.

All property owners are then responsible to supply potential buyers or tenants with a valid free of charge EPC at the onset of any transaction, according to the law. This contains information about a property’s energy use, typical energy costs and recommendations on how to reduce energy consumption.

An EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient) and is valid for 10 years.

Specifically, the EPC for the property and its accompanying recommendation report must be made available when written information about the building is provided as a result of a request by a prospective purchaser and all advertisements in the commercial media must clearly show the energy rating of the building.

It must also be provided before a property is viewed and a copy must also be handed to the successful buyer or the person who takes up the tenancy.

Why are these changes taking place?

The built environment has been identified by the government as a major contributor to Greenhouse Gas (GHG) emissions and thus poses a threat to the UK meeting its 80% carbon reduction target by 2050.

The Government hopes that the MEES regulations will help improve the energy efficiency of older buildings while working towards achieving the UK’s carbon reduction targets.

How Will The EPC Regulations Be Applied And Enforced?

Alongside any property that is marketed for sale or to let, the EPC regulations will also apply to existing lease renewals including statutory renewals under the Landlord and Tenant 1954 Act.

From 1 April 2023, the EPC regulations will also be enforced on existing lettings that were entered into before the implementation date. Tenants of existing properties will also be caught by the new EPC regulations if they choose to sublet surplus space to third parties.

Some buildings are exempt from energy performance evaluation. These include buildings that are used primarily as a place of worship and temporary buildings with a planned use of less than 2 years.

Exemptions to the EPC Regulations include properties which will be leased for a term of 99+ years or short lettings of 6 months or less.

Some further exemptions include if the property owner cannot obtain consent from third parties (such as a superior landlord or planning authority) to do the works, or where the improvements would negatively impact the value of the property.

However, these exemptions are only valid for five years, cannot be transferred to a new landlord and must be registered on the central PRS Exemptions Register.

Local authorities will have authority to issue compliance notices and penalty notices, determined by the property’s rateable value if the EPC regulations are not upheld.

What Are The Implications For Property Owners?

Property owners do not just face a costly bill for failing to adhere to the new rules, they face other liabilities too.

The commercial valuations and marketability of their property could be badly affected unless they are upgraded to meet the minimum standards and there could be implications for dilapidations assessments and rent reviews.

If a property has had a recent significant refurbishment then the efficiency standards of the building may well have been upgraded in line with the new rules. However, if no works have been done for a long time then it is likely that the building will fall foul of the changes to the EPC Regulations.

What Should Property Owners Do?

Property owners should obtain an EPC as soon as they can when planning to lease or let their property, under the new rules.

If the energy performance rating is within A to E then the property can be put on the market, but if the rating is F or G then works will need to be done to bring the property up to a higher efficiency standard.

The EPC reports contain cost-effective recommendations on how property owners can bring their energy efficiency in line with the rules.

These recommendations will need to be implemented before the property can be put on the market.

How We Can Help

Prideview Group can help ensure you are compliant with the EPC regulations, avoiding unwanted costly bills.

We can give you advice on the legislation and what it means for your assets.

 

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