Landlords: Are you running out of energy?

For the last few years the Government has been seeking to improve the energy efficiency of the building stock of the United Kingdom by use of Energy Performance Certificates (EPCs). These give a grade between A and G for the energy efficiency of buildings and make suggestions of improvements that could be made together with indicative savings that could be realised.

The key area of legislation here is the Energy Act 2011. One of the most important upcoming changes relates to minimum standards for leased premises. From April 2018 (at the latest) it will be illegal to rent out a property which does not meet the minimum standard. As yet the minimum standard has not been confirmed but it is widely expected that it will be illegal to let properties if they fall in Band F and G and potentially also some of Band E. For buildings where the maximum achievable standards (with all improvements made) are below the minimum there are expected to be exemptions.

These changes apply to commercial premises and also many residential premises (those on Rent Act 1977 tenancies and Assured Shorthold Tenancies). Landlords who have let properties on long commercial leases that commenced before the advent of the EPC regime may unknowingly be the owner of a sub-standard building.

We would suggest Landlords consider the following steps to prepare for the changes:

1) Check your property portfolio and establish which properties have EPCs and which properties have an EPC rating of E or below.
2) Identify from the EPC reports what improvements are practicable, which are essential and which can be achieved.
3) Identify whether the cause of low ratings could be as a result of your tenant’s activity.
4) Do the terms of your leases entitle you to recharge the cost of improvement works by reason of statutory obligation?
5) Discuss with your tenant what is proposed and potentially any collaboration that could be agreed?Bear in mind that for some time it has been an offence to let a property which does not benefit from an EPC.

These changes may be brought forward and therefore we would suggest that the time to be considering such matters is now. 

We can assist you with drafting leases that allow for statutory works and reviewing your existing portfolio of leases to see what your options are. Please do not hesitate to speak to a member of our Property team for more information.
James Dunn 
Commercial Property
Tel: 01756 692 875