Commercial property landlords were given yet another hoop to jump through last year with the intro
duction of new requirements around energy efficiency. In April 2018, minimum Energy Performance Certificate (EPC) ratings came into force, which meant that landlords of commercial properties could no longer grant or renew a lease with an EPC rating below E. In a sector awash with regulation, this became yet another requirement for commercial landlords to adhere to. Many remain unaffected by this, as so far the legislation change only applies to new leases, or those which are being renewed.
However, as of April 1 2023, this will extend to all existing leases, and landlords will not be allowed to continue to let commercial properties with an EPC rating below E – so for those landlords who have not yet had to conduct assessments and necessary works on their property, now should be the time that process begins.
Commercial property agents estimate that more than a third of properties risk falling foul of the new round of legislation in four years’ time, so clearly there is work to be done. The ability to produce an EPC to the required standard will be crucial, not just in terms of the landlord’s ability to lease it, but in its valuation.
There could be major implications for commercial property owners and investors in how the value of a property could be adversely affected if it fails to show it complies with the relevant legislation. A property which is non-compliant will be difficult to sell, and leasing it will not be possible, so it is important that landlords begin to assess their portfolios now and take the necessary action.
Failure to comply with the EPC regulations can result in a local authority serving a compliance notice – if this is not actioned, a penalty of up to £5,000 can be imposed – although it should be noted that there are some exemptions to these rules, including listed buildings, temporary structure, industrial sites or workshops and detached buildings with a floor space of less than 50sq m. Some vacant properties and buildings which are due for demolition are also exempt.
While work to rectify a negative EPC rating can take time and investment, in many cases, the necessary EPC rating can be achieved at the first attempt through some minimal changes, such as the installation of energy efficient light bulbs, which can have a big impact when allowed to take effect. It is always important that an accurate rating is sought from a qualified and accredited energy assessor.
Commercial property landlords, owners and investors would be well advised to take action now so that if they wish to lease or sell at any stage, they will have the appropriate EPC documentation to proceed without further delay.
Alok Loomba is Partner in the Real Estate team at Sintons in Newcastle. Contact him on alok.loomba@sintons.co.uk or 0191 226 7843.
