ENERGY PERFORMANCE CERTIFICATE (EPC) – WHAT ARE THE REGULATIONS?
The regulations regarding Energy Performance Certificates are changing almost on a yearly basis. The current legislation states that a property with a rating of F or G cannot be let out. This has been the case from the 1st of April 2018. You must show that you have done as much as possible for the tenant to improve the rating beyond the F and G it currently has. Most of the Energy Performance Certificates are now starting to run out as they only last for a 10-year period. You will find over the last 10 years the ratings have changed dramatically. It may be that you will not need to carry out any work as a landlord within that time period. The Government has the tendency to change what is expected of energy performance standards.
CAN I LET MY PROPERTY HAVING AN F ENERGY RATING?
No, to let out a property it must have an energy rating of at least an E. There can be large fines for enforcement which range between £2,000 to a possible maximum fine of £150,000.00.
ARE THE RULES CHANGING AGAIN IN FUTURE?
Yes, the rules will change in future in 2023 and beyond.
Did you know that you must serve it on your tenants, and have it acknowledged to serve a Section 21 Notice? Please see our previous article on the deregulation bill. It is important that the EPC is served on your tenant at the beginning of the term. If it changes during the term, then you also must have it served again. The serving of the document is not the only thing. You also must have it acknowledged by the tenant to say that they have received it. This is critical.
There are new restrictions on the 1st April 2023. From the 1st April 2023 property owners must not continue to let properties that have an EPC rating of F or G. From the 1st April all let properties with an EPC rating must have a minimum rating of E.
We recently had a cases where a landlord had been renting the property for some considerable time and wasn’t aware of the rating change. He was subsequently contacted by the local authority to confirm it was unacceptable to rent the property. He contacted us as we didn’t let the property and passed the property over to us. Unfortunately, there were various breaches which we will mention later but the energy performance certificate was a G.
This was done some considerable time ago and whilst works were needed to the property to bring it further up we instructed another energy performance certificate first. The rules from the previous certificate had changed and we were able to ensure that his EPC was increased to the minimum requirement of E. There were a list of works that could have been carried out to make it even better but it was agreed at the time that this solved the initial problem.
Enforcement and penalties
Landlords aren’t aware that there are enforcements and penalties when dealing with energy performance certificates. You should ensure that you do check the updates and why not subscribe to our newsletter in order to understand this. For breaches that are less than 3 months the landlord renting out a substandard commercial property can lead to a fine of £5,000 or higher ie 10% of the rateable value up to a maximum of £50,000.
Breaches for MEES regulations can trigger a fine higher of £10,000 or 20% of the rateable value up to £150,000. When it comes to residential property it can be a minimum of £10,000 and more depending on the breach and how long it takes.
What happens on commercial property – are energy performance certificates required?
Whilst the breaches of MEES regulations does not affect velocity of the lease from the 1st April 2023 an occupier will not be able to sublet or continue to sublet unless an EPC rating of E has been claimed.
There are certain commercial properties that are exempt from the MEES regulation.
Properties do not require an EPC such as;
- Warehouses that do not use energy to condition the indoor climate.
- Temporary buildings with an intended life of 2 years or less.
- Small buildings – stand alone buildings that are less than 50 square metres.
- Industrial site or work sites with low energy demands.
- Properties to be demolished but only in certain circumstances.
- Listed buildings but only if compliance with unacceptable character or appearance. It is important that you are aware of the rules and regulations in this regard.
There are further regulations coming down the line for landlords which will make a substantial difference to your property. The proposals have been made and so far as we are aware are due to be implemented from 2025 onwards. However, this will always be subject to change. The minimum requirements from the 1st April 2025 will require all properties to raise from an E to a C. This will relate to new tenancies and then from the 1st April 2028 for existing tenants.
There is a current cost cap which is £3,500 but this is being raised to £5,000 per property. The Government said this will be sufficient to bring more than 90% of D rated properties up to a C rating, as well as 60% of E rated properties. It is not clear whether existing spending will count towards a new cap.
However, there is a fabric first policy due to be introduced. This would control in which order all the work to be carried out. So improvement to the fabric on the building ie installation and windows must be done before items such as a new heating system is installed.
You now have to have a commercial EPC for your business.
When do you need an EPC?
You must have an EPC if you;
- Rent out or sell the premises
- A building under construction is finished
- There are changes to the number of parts used for separate occupation and these changes involve providing or extending fixed heating, air condition or mechanical ventilation.
Did you know you can be fined between £500-£5,000 based on the value of the property if you don’t make an EPC available to a prospective buyer or tenant.
When do you have to display one?
You must display an EPC by fixing it to your commercial building is all of these apply;
- The total useful floor area is over 500 square metres.
- The building is frequently visited by the public
- An EPC has already been produced for the building for sale, rental or construction
How do I get a certificate?
You can only get an energy performance certificate from a commercial energy assessor.
The type of assessor you will need will depend on the complexity and the features of the building. If you need advice in choosing one, speak to a commercial energy assessor or contact the approved quotation scheme they belong to.
What are the exemptions?
You don’t need an energy performance certificate if you can demonstrate that the building is one of these;
- Listed or officially protected in the minimum energy performance requirements which would unacceptable alter it.
- A temporary building only to be used for two years or less
- Used as a place of worship or other religious activities
- An industrial site, non-residential or agricultural building that doesn’t use much energy.
- A detached building with a total floor space under 50 square metres.
- Due to be demolished by the seller or the landlord and they have planning and conservation consent.
Vacant buildings and demolition
A building is also exempt if all of the following are true;
- It is due to be sold or rented out with vacant possession
- It is suitable for demolition and the site can be redeveloped
- The buyer or tenant has applied for planning permission to demolish it
You can review if you get a penalty charge notice. The notice will tell you how to do this. If the review fails you will get a letter confirming your penalty.
You can appeal to the county court but you must do this within 28 days of receiving your confirmed penalty.
Why do I need to get a EPC?
On the 1st April 2023 the next regulations on EPC came into force by the Government in order to push net zero emissions by 2050.
It has been confirmed that from that date all rented commercial property will need to have an energy performance certificate rating of band E or better and failing to achieve this will see landlords face potential charges of up to a maximum of £150,000.
What does this mean for landlords?
Landlords are required by law to ensure that their properties meet the required EPC rating. Currently, all commercial property must hold an EPC and a rating band of E or better prior to any new leases or renewals being granted.
From the 1st April 2023 this will be extended to all rented commercial properties. This will include properties where the lease is on mid term.
What will happen in future?
You would need to be aware that there are future proposals for the minimum standards to be increased to band C by April 2027 and band B by April 2030.
Are there going to be any exemptions?
Whilst the new regulations apply to all rental commercial premises (with the exception of those leases of less than 6 months, or more than 99 years) limited exemptions do apply where undertaking works should improve the rating is either not possible not economically viable.
Any landlord that is seeking relying on exemption needs to look into this themselves. Every property will be different.
What are the next steps for landlords to be taking?
The key issues for landlords are;
- Check whether your property had a valid EPC rating of E or better.
- If it is not the case then check whether any leases are due to expire.
- If the lease is due to expire after the 1st April 2023 check whether you have the right to access and undertake the works under the terms of the lease.
- Check the terms of any current leases to establish whether any costs incurred regarding the EPC can be recovered from the tenant.
Will this apply to my building?
The new regulations are estimated to apply to at least 85% of non-domestic rental buildings.
Rented buildings account for 61% of non-domestic stock in England and Wales and they produce 37.5% of all emissions for non-domestic buildings.
How are the EPC assessments made?
EPC assessments are available at different levels. Commercial properties typically require a level 4 assessment, but this is dependant on the complexity of the building, engineering services installed, specifically the heating, ventilation and air conditioning systems.
Do I need to get the right level of assessment?
It is essential to obtain an accurate rating for your property.
What happens after the assessment?
Once the assessment is complete the recommendation report is a good place to start in establishing what additional measures or works are required to improve the energy rating of your building.
Completing this exercise in advance of needing a new EPC for your property will allow you time to plan a budget for works required to ensure your building remains lettable at the next lease.
How pays for the works?
Building owners and occupiers need to look carefully at their leases to determine the party reasonable for the building fabric and surfaces and therefore who should implement and pay for the approved works.
It is so important that landlords understand what their legal requirements are. The Government are changing the goal posts almost by the day. They have implemented over 125 new laws within the last five years and a lot of the announcements go under the radar. We always ensure that we are fully updated with any Government announcements and have regular meetings with our solicitors every other month. Please click here if you wish to see the energy performance certificates guidance from the Government. If you are not sure whether you are complying with the legislation, then don’t hesitate to contact our Administration Team on (01273) 749169.
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