In this article, Litigation Executive, Sophie Greensill discusses the upcoming changes to The Minimum Energy Efficiency regulations and how they will affect non-residential landlords.
What has happened since the regulations came into force?
The regulations were brought in by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, with a view to improving energy efficiency across the rental market.
Since the regulations came into force, there have been transitional periods for residential and non-residential privately rented property, so that landlords have time to make any required changes. The final transitional period, which affects non-residential property, is coming to an end on 1 April 2023.
What that means for landlords of privately rented non-residential property, is that after 1 April 2023, they may not grant a new tenancy of, OR continue to a let under an existing tenancy, a ‘sub-standard’ property.
A property is defined as ‘sub-standard’ if it has no EPC certificate, or an EPC certificate with a rating of F or G. Properties with an EPC rating of A to E, or which are exempt from the EPC scheme, remain unaffected by this legislation.
For any unassuming landlords, there may be significant work to be done before 1 April in order to comply with the legislation.
The statutory sanction for non-compliance is a fine, with enforcement to be carried out by Trading Standards, who also enforce other EPC breaches. The fines imposed will be up to 20% of the rateable value of the property, to a maximum of £150,000.
What does this mean for landlords?
Currently the statutory sanctions are limited to the above, and do not extend to actually invalidating leases/properties, however this does not mean that landlords will not be left in breach of the terms of their leases on an contractual basis. This has an array of implications which clued-up tenants may well try to take advantage of.
Being in breach is also highly likely to have an effect on the value of a property’s reversionary interest if a landlord wished to sell, and an impact on dilapidations assessments when a current lease is coming to an end. It is also likely to have an impact on rent reviews, as the market rent for a non-compliant property is likely to be less than that of a compliant one.
It is therefore wise for all commercial landlords to ensure that they have an A-E EPC rating in place, or have an exemption approved, by 1 April. This should be carried out by a RICS regulated surveyor.
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If you are a commercial landlord and have any questions or concerns about the new regulations and the impact on your lease, please get in touch with our Property Litigation team, and we can provide you with bespoke advice.
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