It is estimated that up to 35% of properties in the UK could be unlettable by 1st April 2018 if action is not taken to improve the property’s energy efficiency rating. The Energy Act 2011 contains a provision for minimum energy standards, andfrom 1st April 2018 it willbe unlawful for a landlord to lease a non-domestic property with an EPC Rating of less than ‘E’.
An Energy Performance Certificate (EPC) is required before a property is marketed for sale or rent in the UK. An EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient).
It is not just those properties that are currently rated F/G that will be impacted by these new regulations. EPCs have a validity of 10 years. A property with an EPC from 2008 may last through threebuilding regulations updates before the owner is legally required to produce another. In which time, the EPC could have dropped by a whole three rating bands. It is possible for a ‘C’ rated building to decline dangerously close to, or below, the ‘E’ threshold by 2018.
As building regulations continue to set more challenging minimum efficiency standards for the building fabric and services, those buildings with inherent problems with the building construction will find it increasingly difficult to achieve compliance. As such, early action is key to keep the costs of compliance low and maintain rental income.
Properties with an EPC Rating of F/G may still be marketed post 2018. However, the prospective tenant and landlord must agree on measures to improve the efficiency of the building prior to the lease being granted. This provides an additional level of risk to landlords, with tenants potentially being able to demand that more expensive works are carried out at the landlord’s expense.
From 2018, only new tenancies and renewals will be affected. However, from 1st April 2023 all existing tenancies will be subject to Minimum Energy Performance Standards, with F&G rated building phased out of British building stock. This could lead to landlords losing tenants, and tenants business operations being heavily disrupted as they look for new premises.
Exemptions to the rule
Buildings that do not require an EPC:
- Places of worship, temporary buildings, building with