Will you still be able to let your commercial property after April?

Even properties currently rated 'E' or higher may be affected

14 February 2018

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Commercial property owners should be aware that the new Minimum Energy Efficiency Standards (MEES) which come into force on 1st April 2018 are likely to have a significant impact across the property industry, and some properties that are currently rated ā€˜Eā€™ or higher, may be affected.

After this date, it will be unlawful to renew a lease or do a new letting on any non-domestic building in England and Wales which does not have a minimum Energy Performance Certificate (EPC) rating ‘E’. Properties rated F or G will become unlettable.

Importantly, owners and landlords of property with existing EPCs of E or higher, should not be complacent. Building regulations have evolved since EPCs were introduced in 2008 and the measure of energy efficiency has become stricter. It is now far more difficult to obtain a good EPC rating for a property. EPCs need to be renewed every 10 years, meaning there is a risk that properties with an existing assessment of D or E may be rated lower on reassessment. A rule of thumb is that any ratings from 2012 or before are likely to become unreliable.

Data from the DCLG shows that in Wales, just over 18,500 EPCs have been lodged on the Register to 31st December 2017 since 2008. Of these, just 2,025 fall into F and G categories. However, 9,155 are rated D or E, some of which could potentially become victim to a lower rating upon reassessment.

The most prudent course of action is to review your property stock and ensure that all rentable properties have an up-to-date EPC assessment. Where they do not meet the minimum standard of E, implement a plan to improve the energy efficiency with the help of a specialist. You can also seek advice as there are some exemptions from the regulations.

Finally, whilst the MEES regulations apply initially to the granting of new leases and lease renewals, from 1st April 2023 they will extend to all active leases. Failure to comply could make you liable for penalties up to £150,000. The new regulations are clearly a major consideration for landlords going forward.

Mansford has expanded its investment portfolio over the last few years. Over this time Andrew West has provided us with a full rating valuation service which has involved giving a view on liabilities prior to acquisitions, as well as conducting negotiations with Valuation Officers on our UK estate. The portfolio includes a wide range of properties from shops, offices and pubs to major leisure schemes. He has been particularly successful in mitigating our liabilities to empty property rate, which has been an issue on acquisition prior to implementing our development and letting strategy. I have no hesitation in recommending Andrew's expertise in rating valuation for all property types. The profile of property within his portfolio and the successes achieved are testament to his position as an extremely accomplished rating practitioner.

Leopold Hall, Partner, Mansford LLP