As of next month, a landlord will not be able to let a pub property that has an energy performance certificate (EPC) rating of an ‘F’ or ‘G’ – with new lets requiring an ‘E’ rating or better.
Fleurets’ senior associate Andrew Whelan explains: “The agent or the landlord is not in breach if they market a property of that rating - but they are in breach if they complete.
"The fines for a landlord, if they do let a property that is 'F' or 'G' rated, are quite substantial and are related to the rateable value of the building - with a maximum fine of £160,000.”
Responsibility for landlords
The new legislation is intended to make commercial properties more energy efficient, and to drive landlords and the owners of properties to carry out work to make them more efficient rather than the onus being on the tenant.
Whelan adds: "The issue at the moment is that if the property is run by a tenant, there is no driving force for landlords to make the buildings energy efficient because it is the tenants who pays the bills. With the new regulations, the landlord is responsible for carrying out energy efficiency measures.”
"The biggest impact in the short term is that it could delay or frustrate deals, sales and lettings or cause them to become economically unfeasible for the landlord.
"There are also implications that if you've got a large estate of poorly rated properties there could be an impact on the overall value of that estate.
“Landlords and asset managers need to ensure that this issue is addressed sooner rather than later.”
Potential stumbling blocks
Whelan states that landlords of both listed buildings and sites with EPC certificates obtained close to a decade ago are those most likely to be affected by the introduction of MEES regulations on 1 April.
"There's ambiguity as to whether a listed property will fall under the MEES regulations. Previously if you had a listed property there was no legal requirement to provide an EPC for sale or letting purposes.
“MEES is saying that if there is no legal requirement for an EPC the regulations don't apply, but it also specifically mentions that listed properties 'may' fall under MEES - so there is ambiguity.
The other potential stumbling block, according to Whelan, surrounds EPC goalposts moving as a result of changing building regulations during the period over which a certificate is valid.
Certificates are valid for 10 years, however, in that time, it’s entirely possible that changing energy efficiency standards could render what was an ‘E’ rated building at time of assessment as an ‘F’ or ‘G’ when it’s time to renew.
Whelan advises: "We would suggest that if you've got a listed property that you request a draft EPC and not lodge it.
"If you've got an older EPC, and you're looking to market a property, I would advise that a new EPC is requested. Once you know what the current EPC rating is you can decide what further action you need to take.”
The costs of getting a property up to energy efficiency standards as of the 1 April may range in scale from a change of lighting to a complete refit of the heating system. However, Whelan flags up that exemptions are available if it can be proved that improvements aren’t economically feasible.
"You would have to apply to the exemption register. To prove that it is not economically viable you would probably need an up-to-date EPC and you would need somebody to give advice and some idea on the cost involved.”