Legislation in 2007/2008 saw the introduction of energy performance certificates (EPCs) which show the energy efficiency of a property and contain recommendations as to how that efficiency can be improved. An energy performance certificate is now required whenever a residential or commercial property is let or sold in England or Wales (subject to certain minimal exceptions).
From our experience, property owners and tenants do not pay much attention to the energy rating of a property but perhaps after reading this article they might…
Regulations are expected which will mean that from April 2018, it will be illegal to rent out residential or commercial properties which do not achieve a minimum energy efficiency rating. It is anticipated that the minimum energy rating will be F or G, so in 2018 it may become illegal to rent out a property with an energy efficiency rating of F or below. It is estimated that these regulations will affect approximately 20% of properties in England and Wales.
Although the details themselves have not been finalised, regulations along these lines will certainly be introduced. Property owners may therefore want to prepare themselves for 2018 and consider doing the following:
- Review their property portfolio and obtain EPCs for those properties which do not have certificates.
- Review the certificates and assess what measures are needed to improve energy efficiency.
- Check government funding availability e.g. the Green Deal. The Green Deal is a financing framework which allows energy improvement measures to be funded by an additional charge on energy bills.
- Carry out energy improvement measures gradually and look to spread the cost of works. As 2018 draws near, it is likely that the costs of carrying out energy improvement measures will increase due to the increased demand for works from ill-prepared owners.
- Check their existing leases – will the tenant’s consent be required to carry out any immediate works? Can you recover the cost of works from the tenant?
It will be interesting to monitor the introduction of the regulations and no doubt questions will arise, for example:
- Will regulations eventually be applied to properties which are sold?
- Will less energy efficient properties decrease in value?
- Will tenants have to pick up the bill for energy improvement measures?
- Will the energy efficiency of a property have an effect on rent values?
- Will existing leases become void for illegality?
The answers to these questions will come in time and property owners may want to wait until 2018 but they should be aware that owning an inefficient property now will be costly in the long run!
For further information, please see here.
Beverley Merrell is a Director at BHW Solicitors in Leicester and regularly writes on commercial property issues. Beverley can be contacted on 0116 281 6221 or by email at beverley@bhwsolicitors.com.