Proposed Minimum Energy Standards could force Landlords to Upgrade

Posted on 7 August, 2014 by Cliff Goodwin

Thousands of commercial landlords could be facing a fine unless they upgrade their premises to meet the Government’s proposed Energy Performance Standards, a leading property agent has warned.

Proposed-Minimum-Energy-Standards-could-force-Landlords-to-Upgrade (2)

Consultations are currently underway on regulations outlined in the 2011 Energy Act and which places a duty on the Government to impose minimum energy efficiency standards for commercial buildings. After the 1 April, 2018, deadline it will be unlawful to lease a commercial building below a prescribed minimum energy performance standard until qualifying improvements have been carried out.

One survey last autumn showed that around 80,000 commercial properties — 18 per cent of all certified buildings — had an Energy Performance Certificate (EPC) rating below E.

“Where a property has an F or G rating, landlords will be required to make improvements that meet the ‘Golden Rule’,” explains Samantha Jones (pictured ), an associate director at commercial property agency Prop-Search. “Basically, the ‘Golden Rule’ means that repayments for improvements, including interest charges, must be the same or less than the expected energy bill savings.”

Landlords would not be required to undertake efficiency upgrades that are not cost effective, allowing some buildings to retain F or even G ratings after all eligible measures have been undertaken.  Exemption would also apply where necessary third party consents could not be obtained despite “best endeavours” to contact a mortgagee, landlord, local planning authority, or tenant.

It is important to note that the “Golden Rule” exemption and the “lack of consent” exemption are not intended to last in perpetuity, Jones stresses. The Government is suggesting that they should expire after five years, after which the landlord would need to carry out the improvements necessary to get an E rating or again demonstrate an exemption in order to let the property.

“Whilst an EPC is required regardless of the lease length, the Government is considering exempting short-term leases of less than six months,” she added. “However, more than two short leases granted to the same tenant would need to comply with the regulations.”

It is planned that the regulations come into force on a phased basis, starting with new lettings and lease renewals from 1 April 2018, and with lettings from 1 April 2023. A breach of the regulations could result in a fine.

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