Let's talk about EPC changes - what Landlords need to know

Janine Harris, Head of Commercial Property at AMD Solicitors outlines the Government’s phased roll out starting from April 2018 of the EPC legislation on Minimum Energy Efficiency Standards (MEES).

What is an EPC?

An Energy Performance Certificate (EPC) which is valid for 10 years shows information about the energy efficiency of the property to which it relates and what you can do to improve it.

EPCs are needed whenever an eligible property is constructed, sold or rented out. Property owners must provide an EPC for potential buyers or tenants before marketing a property to sell or rent. In addition, a landlord will be required to obtain an EPC after installing certain improvements before they let the property.

An EPC rates a property’s energy efficiency on a scale of A-G, with ‘A’ being the most efficient (A+ for non-domestic buildings) and ‘G’ the least efficient. 

What is changing?

From 1 April 2018, if you are a landlord and you are granting, renewing or extending a lease of a property, it must achieve a minimum energy rating of band ‘E’, this means properties with a rating of F or G are non-compliant. This rule applies to both domestic and non-domestic properties.

The regulations will be phased in and will apply to continuing lettings from 1 April 2020 for domestic properties and 1 April 2023 for non-domestic properties.

If the regulation applies, landlords will need to ensure that energy efficient improvements are made to the property which raise the EPC rating to a minimum of E.  However, these prohibitions on letting ‘sub-standard’ properties (i.e. an EPC rating of F or G) are not absolute.  

In certain, limited circumstances landlords may be able to claim an exemption from the prohibition on letting sub-standard properties; this includes situations where the landlord is unable to obtain funding to cover the cost of making improvements, or where all energy efficiency improvements which can be made have been made and the property still remains sub-standard. Where a valid exemption applies, landlords must register the exemption on the national PRS Exemptions Register. 

What is the risk if Landlords don’t comply?

A landlord who does not comply with MEES rules may be liable to enforcement action.

Financial penalties are based on rateable values. The penalty for non-domestic properties can be between £5,000 and £50,000 for breaches of up to three months, rising to £10,000 and £150,000 for longer periods. The penalties for domestic properties are far less.

In addition to, or in substitution, landlords found to have been in breach will be named and shamed on a public register for up to 12 months or for such longer period as is considered appropriate.

Aside from the risk of a substantial fine and/or adverse publicity, a sub-standard EPC rating can have a number of negative effects, including:

  • The property may not be marketable without improvement works to bring the efficiency rating at least to the minimum standard;
  • The valuation of properties may be affected if the marketability is diminished; and
  • The assessment of market rent at rent reviews may be affected and there may be implications at dilapidations assessments.

What should I do next?

Prudent landlords should be assessing their properties and preparing an action plan for managing risks to properties which are deemed sub-standard.

Our experienced team of Bristol solicitors can help property owners with all aspects of selling, buying or letting commercial properties. To arrange an initial discussion, please contact Janine Harris, Head of the Commercial Property Department, on 0117 9733 989 or email janineharris@amdsolicitors.com. You can also fill out our contact form and we will get back to you as soon as we can.

 

 

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Janine Harris

Solicitor, Head of the Commercial Property Department


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