Commercial property landlords should act now to prepare for changes in energy efficiency legislation, according to industry experts.
Tough regulations to be introduced in April 2018 will make it illegal for landlords to lease buildings with an Energy Performance Certificate (EPC) rating of F or G.
Speakers from the surveying and legal sectors warned landlords to review their properties when they met at a breakfast briefing organised by Garness Jones chartered surveyors in association with Gosschalks solicitors and Procters, commercial property consultants specialising in energy efficiency.
The event, held at the University of Hull, attracted an audience of property professionals from across the Yorkshire and Humber region. They heard Dale Gooderham, Senior Agency Surveyor at Garness Jones, outline the possible impact of minimum energy efficiency standards (MEES), and the penalties for non-compliance.
He said: “From April 2018 it will become unlawful to let commercial properties that have an EPC rating of F or G. That could affect 18 per cent of commercial property stock. You will not be able to market it without improving it.
Landlords will be the parties most affected. The most obvious threat is the cost of upgrading buildings, but there is also the cost of not being able to collect rent from them.
“Penalties are 10 per cent of rateable value with a minimum £5,000 and a maximum £50,000, increasing after three months of non-compliance to 20 per cent, with a minimum £10,000 and maximum £150,000.”
Nick Procter, Principal of Procters, said the company has completed around 2,000 EPCs since 2008, and he suggested that landlords should be able to cope with the changes if they prepare properly.
MEES is a pain but it is something that we have to take into account. The prohibition of letting sub-standard properties in five or six months is going to have an effect, but the EPC rating of E is generally achievable for most properties.
“It is fairly easy to determine what work is required and it is sensible to do that. Most sub-standard properties can be sorted quickly and cheaply, even changing the light bulbs. It may be as simple as taking out a hot air blower in a workshop but it is important to have a review. It can save you thousands of pounds in unnecessary improvement work. Our advice is to review and repair because it makes good property sense.”
Mark Teal, Head of Property and Real Estate at Gosschalks explored exemptions and exceptions and discussed the relationship between landlords and tenants.
If you are borrowing money you need to be careful that the lender is not going to refuse the loan on the basis that the EPC is inadequate.
“You don’t want to see your tenant take out an EPC that is lower than your own, register it and damage the value of your interest. Don’t prohibit a tenant from commissioning an EPC, but prohibit without the landlord’s consent and then you can influence the process.”
Dale said hopes that the changes would be blocked are unfounded. He said: “Questions have been asked about whether Brexit will have an influence, but this originated in the UK, not the EU, so we can assume it will continue regardless of Brexit and any pressure from the property industry.
“The Royal Institution of Chartered Surveyors will be running workshops which we will be attending. As yet the legislation has not been tested and it may or may not be workable. We will take a proactive approach, monitoring and updating to help our clients.”