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. 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. 

EPCs are needed whenever an eligible property is constructed, sold, rented out or when certain improvements are installed.

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 improvements are made to the property which raises 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.   

What is the risk if Landlords don’t comply?

A landlord who does not comply with MEES rules may become the subject of enforcement action.

Financial penalties are based on rateable values and can be as much as £150,000 for long periods of breach for commercial properties. 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.

This article is provided for general information purposes only and represents our understanding of the relevant law and practice as at the date of uploading. This article should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.

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