Energy Efficient?

Heather Roberts

Head of Commercial Property Heather Roberts discusses the continued tightening of the energy efficiency regime for residential and commercial properties as part of the fight against climate change and, importantly, the preservation of asset value.

If you are a landlord of residential property 1 April 2020 is a key deadline for you. If your property does not reach the minimum standard of an E rating under an Energy Performance Certificate (EPC) from that date, then you could be subject to a fine.

April 2020 is the second date in ensuring energy ratings compliance within the residential sector. April 2018 was the previous key date for a minimum of an E rating on new lettings; this 2020 date applies to existing tenancies.

Energy efficiency should affect us all. We have some very poor-quality housing and mixed commercial stock in this country generally and certainly from an energy perspective. Poor insulation means burning more fossil fuels to keep warm, fuelling (pardon the pun) pollution and global warming. Moreover, it is just plain wasteful, and we cannot continue to squander resources any more, hence the regime.

What should you do? If you have a low rating of F or below then check your EPC’s recommendation report or speak to your energy assessor about what upgrades are required to enable the property to be re-evaluated to rating E as a minimum. Then speak nicely to your tenants about going in to make improvements. They should thank you in the end if such works make their energy bills lower. Make sure you comply to the letter, however, with the landlord’s covenants in the tenancies you have granted.

If you are landlord of commercial property then, similar to residential, new lettings and renewals of commercial properties have not been permitted with less than an E rating since April 2018.

However, April 2023 is the second date whereby all commercial properties must meet the minimum E rating. Basically, landlords cannot continue to let sub-standard property without a legitimate reason as permitted by the MEES Regulations. All works have to be done by the landlords themselves. Today the following percentages of commercial properties have these ratings: Grade E=17%, Grade F=9% and Grade G=10% so you can see there is room for improvement.

What should you do? Do an EPC portfolio audit now and consider what works need to be done. Consider the issues as for residential above but also what an impact poor energy performance could have on rent reviews, ability to let going forward and secure finance against properties. Also bear in mind that legislation will continue to press for higher efficiency standards so consider how far you can upgrade. Key property investors like Legal & General are pushing for C ratings across their portfolio and incentivising their managers to achieve this. Ultimately peer pressure in the market will create competition. Better landlords will do better.