Private commercial property landlords in the West Midlands are being urged to ensure their portfolios meet new energy efficiency legislation.
From 1st April 2018, the Energy Efficiency Regulations 2015 (the “MEES Regulations”) will make it unlawful for landlords to grant a new or renewal lease on commercial premises that do not achieve an energy performance certificate (EPC) rating of E or better.
Properties with an EPC of F or G will no longer be able to be let unless they are successfully registered for an exemption; if a landlord does let these sub-standard properties, they may be levied with fines of up to £150,000 by the Local Authority.
In Birmingham alone, 2,148 of non-domestic properties have energy performance certificates that are rated as F and G.
However, MEES specialist at Lambert Smith Hampton (LSH), Ben Strange, warned that the 6,261 commercial properties in Birmingham with a current EPC of D or E could also be at risk from the regulations.
“While many landlords are considering the risk that F and G-registered properties pose, few have considered the further 47% 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. He continued: “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.”