22nd March 2017
Are you prepared for the changes in Energy Performance Certificate (EPC) Regulations?
Despite Brexit, the EPC Regulations are likely to continue to remain in force. The next significant deadline is 1 April 2018 when commercial properties with a rating of “F” and “G” cannot be let to a new or existing tenant. On 1 April 2023, landlords of commercial property will not be able to let existing tenancies with a rating of “F” or “G”.
Such tenancies will not come to an automatic end, but the Landlord will be subject to enforcement action, as set out below. It should also be noted that nothing in the Regulations interferes with tenants’ rights under the Landlord and Tenant Act 1954, for example to renew a lease, so the Landlord must ensure that property is not sub-standard by these deadlines.
Properties let on a lease of less than 6 months are excluded from EPC Regulations. Landlords can also benefit from an exemption called the “seven year payback test” whereby if improvements to a property to improve its EPC rating to “E” or above are deemed to be not cost effective within a seven year period, then the Landlord does not need to improve the energy efficiency of the premises. Such an exemption may not however pass to a buyer including an intra-group transfer of property.
It is also worth noting that in respect of multi-let properties, a Landlord cannot make a bulk exemption but must make individual applications exemptions in respect of each qualifying unit. Furthermore, in order to rely on the exemption, a Landlord must register this together with accompanying evidence on the PRS exemptions register, which is due to open on 1 April 2017, a year in advance of the deadline for compliance on 1 April 2018. An exemption will not last forever though; only for five years. The case will then be reviewed again and the Landlord must try to improve the EPC rating to the minimum level.
Trading Standards Departments may issue a Compliance Notice which will require a Landlord to provide information on the PRS Exemptions Register. The Trading Standards Departments can also issue a Penalty Notice on a Landlord who has let sub-standard property or not complied with a Compliance Notice.
A Penalty Notice can result in the Trading Standards Departments publishing details of such breach or issuing a financial penalty on the Landlord of up to £5,000 or 10% of the rateable value of the property subject to a maximum penalty of £50,000. A Landlord may appeal a Penalty Notice to the First-Tier Tribunal.
What you need to do
Landlords should review their investment properties to ensure they have an EPC rating of “E” or above, commence improvement works to the property to attain this, or start to gain evidence of an exemption for such applicable units to register on the PRS exemptions register.