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'F' or below and you can not Let it

'F' or below and you can not Let it

Energy performance certificates (EPCs), the changes due next month (April 2018).

18% of non-domestic properties, and one in ten domestic properties, are in the very lowest EPC bands (‘F’ or ‘G’), the government wants to ensure energy efficiency standards for domestic and non-domestic buildings are of a certain level, and to reduce the number of domestic properties in fuel poverty.

It will be illegal for a landlord to grant a new lease with an EPC rating of ‘F’ or ‘G’ from 1 April 2018 unless an exemption applies.

There are wide reaching implications here which will not only impact on the granting of commercial tenancies, but also in dealing with alterations carried out during the term of the tenancy.

From April 2018 commercial properties that have an Energy Performance Certificate will require a minimum EPC rating of E, prior to new lettings being completed. Unless relevant energy efficiency improvements have been carried out, Landlords could face:

• financial penalties, and

• in addition the need to implement improvements within 6 months.

The penalties are to be levied on a graded scale:

1. where the landlord is or had been in breach of the prohibition on letting substandard for three months or less at the time the penalty notice was served, a financial penalty of the greater of £5,000 and 10% of the rateable value of the property, subject to a maximum of £50,000, and

2. where the landlord is or has been in breach of the prohibition on letting substandard for three months or more at the time the penalty notice was served, a financial penalty of the greater of £10,000 and 20% of the rateable value of the property subject to a maximum of £150,000.

Energy performance upgrades will be required for properties which are subject to existing leases post 1 April 2023.

Given the risk to property owners it is clear that a full understanding of the energy efficiency of your property assets should be attained.

Action Points:

• Review your existing portfolio ahead of April 2018;

• Identify the problem properties;

• Plan the solution;

• Make your plan for properties already occupied by a tenant ahead of April 2023; and

• Implement your plan.

If you would like to discuss your property portfolio and which of those properties may be affected please contact a member of our specialist commercial property team: Andrew Cooney or Samantha Lambert.