Landlords: Be aware of EPC Rating Changes. The Energy Act 2011 requires landlords to meet the “Minimum Energy Efficiency Standard” (MEES) for both domestic and non-domestic properties. This means that all rented properties will need to have a minimum energy performance rating of “E” and that properties with an “F” or “G” rating will be substandard. It is estimated that around 20% of rented properties will fail to meet the requisite standard.

The legislation will apply to all new leases from 1 April 2018. If there is an existing lease in place, the legislation will not apply until 1^st April 2023 for non-domestic properties and 1^st April 2020 for domestic private rented properties.

In addition, a tenant of a domestic private rented property (which includes Assured Shorthold Tenancies and regulated tenancies) is permitted to seek the landlord’s consent to make energy efficient improvements themselves, regardless of restrictions in the lease. The landlord is not permitted to unreasonably withhold their consent to such a request.

However, there are exceptions and the new rule will not apply in certain events, examples of which are as follows:-

1. There are leases of properties where there is no requirement for an EPC (i.e. leases commenced before the introduction of EPCs in 2007).
2. There are leases where the term is longer than 99 years.
3. The landlord cannot obtain the relevant consents for the works to bring the property up to standard (i.e. planning approval, consents from lenders or superior landlords etc.).
4. The works required to bring the property up to standard would cause a material net decrease in the property’s value.

In addition, the regulations will not apply in the event that the property is listed and the works required to bring the property up to standard would unacceptably alter the appearance or in the event that there is no heating, ventilation or air conditioning equipment in the property and the property uses no energy to condition the indoor climate.

If a property does not meet the required standard, financial penalties may apply.  Local authorities have the power to serve notices requesting information, to serve penalty notices and to impose fines.  The financial penalties could be as high as £150k if the breach has been ongoing for more than 3 months and up to £50k if the breach has been ongoing for less than 3 months. However, there are still some major issues outstanding, such as whether non-compliant leases will be illegal and unenforceable.

Landlords should now consider the energy ratings carefully, with a view to improving substandard ratings in advance of the introductory dates. 

Please contact us if you would like more information about the issues raised in this article or any aspect of commercial property law on 02920 345511 or commercialproperty@berrysmith.com

Catrin Mackie, Solicitor in Commerical Property at Berry Smith providing legal help and guidane on a wide range of issues.