After April 2018 it will be unlawful for a landlord to let property in England or Wales – either commercial or domestic – if it doesn’t hold an Energy Performance Certificate (EPC) with a rating of at least ‘E’, according to the Minimum Energy Efficiency Standards (MEES) regulations.
The regulations do not affect sales, but they apply to renewals as well as new leases, although there are some exceptions, namely:
- Buildings which don’t require an EPC under current regulations.
- Very short leases (under six months), or lettings of more than 99 years, in the case of commercial properties.
- Domestic lettings by local authorities, housing associations and government departments, and assured or regulated tenancies from private sector domestic landlords.
- If compliance would devalue the property by more than 5%.
- If consent for works is refused by a third party (e.g. an incumbent tenant, or a local authority).
- Once all cost-effective energy efficiency measures have been carried out already, and the minimum ‘E’ rating has still not been met.
In the future, the Minimum Energy Efficiency Standards regulations will be expanded to include existing leases where the EPC asset rating is below ‘E’ (unless one of the above exemptions apply). This will be from April 2020 for domestic properties, and April 2023 for commercial buildings.
There will be financial penalties for not complying with the Minimum Energy Efficiency Standards regulations – in addition to the revenue lost while a property is unable to be rented out – with fines of between £5,000 and £150,000 for landlords (cumulative fines will apply for non-compliance and for continuing to rent out a non-compliant building).
It’s important to consider that the MEES requirements are also affected by the most recent Building Regulations amendments, so it is possible that properties assessed for an EPC prior to April 2014 might be downgraded to an ‘F’ rating, should a new EPC be triggered (perhaps because of a sale or a new lease). But whether this might be a factor in your own portfolio or not, the key to avoiding the worry of lost revenue, financial penalties, or just the expense of last-minute compliance works (because of course, rush jobs always seem to cost more than those without such a critical deadline), is to plan early.
We’d advise getting ahead of the game and reviewing your properties now, to ascertain which fall into the critical ‘F’ and ‘G’ EPC bands. This will not only give you time to budget for the required capital expenditure on these assets, but also enable you to review the terms of existing leases, plan energy efficiency works to coincide with lease expiries and regular maintenance, and negotiate the most economic works contracts.
Our EPC improvement report service offers a comprehensive review of a building’s energy efficiency, including heating, cooling, ventilation, domestic hot water, controls, lighting and building fabric – and crucially, recommendations for the best-value improvements, including how they will impact on the property’s EPC rating. To find out more, please call us on 01206 266755 or email email@example.com.