EPCs and Minimum Energy Efficiency Standards
Landed estates and farming business that rent out property, either residential or commercial, must be aware that the regulations which govern Energy Performance Certificates (EPCs) are changing. From next year landlords will be unable to let properties that fall below the minimum energy efficiency rating on their EPC.
Currently, an EPC is required when a property is built, sold or let. Some properties do not require an EPC (e.g. certain listed buildings, industrial sites, non-residential buildings with a low energy demand), but where they are applicable, they provide information concerning the energy efficiency of the property. EPCs rate properties on a scale from ‘A’ (most efficient) to ‘G’ (least efficient). Once a certificate is issued, it usually remains valid for 10 years. The EPC will include a recommendation report will indicate what cost-effective improvements can be made to improve a property’s energy efficiency.
On 1 April 2018 Minimum Energy Efficiency Standards will come into force for all properties that require an EPC. These Standards state that if a property falls below a minimum rating of ‘E’ on the EPC, it cannot be rented out. This means that properties with an ‘F’ or ‘G’ rating may no longer be legally marketable. There are some circumstances where landlords will be exempt from meeting the minimum standard.
These include where:
- all cost effective improvements have been undertaken;
- the landlord cannot obtain 3rd party consent (e.g. from the tenant or local authority) to do improvements; and
- an independent surveyor determines improvements would devalue the property by over 5%.
These exemptions can only last for up to 5 years however, as the regulations will apply to all leases that require an EPC, including existing leases, from 1 April 2023. The Standards will also therefore impact upon sub-letting and rent reviews during the course of the lease as well. Failure to comply with the Standards will lead to civil penalties, including financial penalties which can extend to 20% of the value of the rateable property up to a maximum of £150,000. With under 12 months to go until the 1 April 2018 deadline, you should review the EPC ratings of the properties that you rent out.
If you have a property that risks falling below the minimum standard and you do not qualify for an exemption, you will need to take steps to improve the properties rating. If steps are not taken in time you run the risk of being lumbered with an unmarketable property or prospect of penalties.
This article was first featured in the May 2017 issue of South East Farmer Magazine.
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