Recently, The Financial Times published an article highlighting that up to 20 per cent of British office buildings will become un-lettable when new energy efficiency measures come into effect in April 2018.
Mark Coxon, director and head of Commercial Agency commented: "Owners of offices that currently fall into the F and G energy efficiency categories – the two lowest that a property can be awarded – should consider how they can improve their rating and act as soon as possible.'
Property owners are being urged to carry out energy efficiency assessments now, ahead of legislation changes. The Energy Act 2011 means it will become unlawful to let residential or commercial properties with the two lowest grades of energy efficiency.
Whilst new categories have been added to the list of buildings exempt from EPC regulations, there is some confusion on how to interpret the new amendments. For example, historic or protected buildings do not need to have an EPC on sale or when marketed to let, where complying with certain minimum energy performance requirements would 'unacceptably' change the appearance or character. It is presumed that buildings listed by English Heritage (or its Welsh equivalent) are exempt. However, there is still some uncertainty and clarification is required1.
Similarly, buildings not used for more than 4 months of the year will be exempt, but it is clear that most rental properties will be affected by these changes2.
Mark Coxon and Alan Stewart, director and head of Residential Lettings and Management at Caxtons agree that although 2018 may seem a long way off, the requirements for buildings that do fall victim of the changes, have significant implications for landlords and occupiers that sublet space.
Alan said "Properties that fall into the two lowest ratings may become impossible to market after 2018 unless they are upgraded to meet the minimum standards."
Mark Coxon says that "By acting now and undertaking an energy efficiency assessment, landlords will have more time to assess whether they need to carry out refurbishments and retrofits to improve the property's rating, revise the terms of the lease or bring forward the marketing of their properties."
Owners could also find that the value of any properties that fall into the lowest energy efficiency bracket could drop and rent reviews might also be affected.
CBRE's Graeme Murray, head of sustainable engineering, commented "You are already seeing EPC ratings being factored into transactions. Informed investors and informed purchasers know."
Carrying out an EPC assessment is the first step any landlord letting property should take. Once assessed, an energy efficiency plan needs to be implemented on any property that is rated F or G, or is at risk of being in the lowest energy efficiency bracket.
It is recommended landlords consider the cost viability of implementing energy efficiency improvements versus marketing the property earlier than planned.
Landlords that choose to go ahead with efficiency works should make sure they're implemented before 2018 and that they take advantage of any void periods or lease breaks, or include them as part of an on-going maintenance programme.
For advice and help understanding the implications of The Energy Act 2011, for residential property contact Caxtons Residential Lettings and Management teams in Canterbury (01227 788088), Gillingham (01634 576000) or Gravesend (01474 364364).
For commercial property, contact our Commercial Agency offices in Canterbury on 01227 788088 or Crossways on 01474 567666.
1To check whether a building has a current listing visit www.english-heritage.org.uk/caring/listing/listed-buildings
2A guidance booklet has been issued by the Department for Communities and Local Government and can be found at https://www.gov.uk/government/publications/improving-the-energy-efficiency-of-our-buildings
Exemptions set out in the DCLG guidelines are:
- buildings and monuments officially protected as part of a designated environment or because of their special architectural or historic merit in so far as compliance with certain energy efficiency requirements would unacceptably alter their character or appearance;
- buildings used as places of worship and for religious activities;
- temporary buildings with a planned time of use of two years or less, industrial sites, workshops and non-residential agricultural buildings with low energy demand and non- residential agricultural buildings which are in use by a sector covered by a national sectoral agreement on energy performance,
- residential buildings which are intended to be used less than four months of the year;
- stand-alone buildings with a total useful floor area of less than 50 m2.