Warning to landlords on energy efficiency measures

Private commercial property landlords have less than nine months to ensure their portfolios meet new energy efficiency legislation say Lambert Smith Hampton.

From 1st April 2018, the Energy Efficiency Regulations 2015 (the “MEES Regulations”) will require landlords of commercial rented property to only offer leases on premises that achieve an energy performance certificate (EPC) rating of E or better. Properties with an EPC of F or G will not be able to be let; if a Landlord does let these sub-standard properties, they may be levied with fines of up to £150,000 by the local authority.

LSH’s MEES specialist, Ben Strange, warns that properties with a current EPC of D or E could also be downgraded as a result of the Regulations.

“While many landlords are considering the risk that the 18 per cent of properties that are F and G-registered pose, few have considered the further 47 per cent of properties that are D and E-rated,” he said.

EPCs were introduced in 2008 and apply to the vast majority of commercial properties that have fixed services to condition their internal environments.

Since then, the technology, training and regulation of EPC assessment has become more refined, which has led to the process of EPC assessment being more detailed and accurate. The efficiency requirements of buildings and their services have also improved significantly since 2008 through cyclical revisions of the Building Regulations.

“The combination of these two factors has been regularly shown to result in EPCs on the same property dropping up to two ratings upon an EPC being reassessed,” said Ben.  “Where landlords may consider a number of D and E-rated properties on their portfolios to be ‘safe’, in fact, those properties could pose the greatest risks, particularly where their tenants are wise as to how to use the Regulations to their advantage.”

“A tenant, for example, could successfully have the EPC of a property they are in downgraded. They will then benefit when it comes to dilapidations claims, break clauses, lease renewals or rent reviews. This will cause a significant shift in the landlord and tenant balance, depending on the advice each party acts upon.”