It has been well documented that from 1st April 2018, all non-domestic properties must have an Energy Performance Certificate (EPC) rated E or higher. For those properties rated F or G, the new Minimum Energy Efficiency Standards (MEES) will class them as ‘sub-standard’ and it will be illegal for landlords to let them on a new or renewed lease.
This ruling will be extended to cover all private rented property from 2023 so even if the lease is mid-term, a minimum of an E rating EPC will be required.
While there has been plenty of notice, it hasn’t been welcomed by the industry, particularly those who own or occupy buildings that currently fall within the F and G band ratings.
We work closely with Hampshire based EPC specialist UK Energy Surveys for all our EPC ratings work. Director and founder Jeremy Maltby comments:
It is estimated that approximately 18-20% of non-domestic properties in England and Wales still have an F or G EPC rating. Given the risks to landlords, a full understanding of energy efficiency is required for their property assets, to ensure they are meeting MEES ahead of next April.
Often just changing light bulbs from halogen or tungsten to LEDs can make a big difference as 80% of the energy used creates heat not light.
Failure to meet the required standards will be costly with fines for non-compliance of up to £150,000 being imposed on the landlord (or a tenant looking to sub-let). However, there are questions about how effectively these penalties could be enforced. Historic accuracy of EPC ratings has given rise to considerable lack of confidence from landlords and occupiers alike, many of who feel that their portfolios have been incorrectly rated as sub-standard.
Landlords and tenants looking to assign or sub-let space cannot afford to bury their heads in the sand as time for action is fast running out. For many, energy management plans will have been put in place to resolve any potential issues, but for those who now believe they might be caught out, immediate action is required to avoid penalties and protect assets ahead of the April 2018 deadline.
There are cases where landlords can seek a five-year exemption from MEES if they are able to demonstrate any of the following:
• The lease period is less than six months or more than 99 years.
• The building is listed or officially protected and the minimum energy performance requirements would unacceptably alter it.
• The building is temporary and only going to be used for a maximum of two years.
• The building is used as a place of worship or other religious activities.
• The building is an industrial site, workshop or non-residential agricultural building that doesn’t use much energy.
• The building is detached with a total floor space of under 50m2.
• They have carried out all cost-effective energy efficiency improvements.
• Measures identified by Green Deal or an alternative government scheme are not cost effective (and devalue the property by 5% or more. Failing to raise the EPC rating above an F).
• Or if third-party consents are not available despite reasonable effort.
With less than a month to go, landlords should take advantage of any void period or lease breaks coming up, as well as factoring in energy efficiency improvements into current asset management and regular maintenance programmes.