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7 things you need to know about the 2018 EPC changes

After what seemed to be an eternity of uncertainty, the 2018 EPC regulation changes have been finalised by the Department for Energy & Climate Change.

These changes will mean that it will be unlawful to let or lease a residential or commercial property with a poor EPC rating. Here are 7 things you need to know about the changes.

1. THE REGULATIONS SURROUNDING THE ENERGY PERFORMANCE CERTIFICATE ARE CHANGING FROM 1 APRIL 2018.

This has been a long standing concern of the industry with uncertainty amongst agents, landlords, tenants and energy assessors as to when these changes would come into effect and just what the implications of these changes would mean for all of those involved.

2. BOTH COMMERCIAL EPCS AND RESIDENTIAL EPCS WILL BE AFFECTED WITHIN THE PRIVATE RENTED SECTOR.

As expected, these new minimum energy efficiency requirements will apply to both the domestic and non-domestic sides of the PRS meaning that whether a landlord is letting out a commercial property or a house to a tenant, it could be unlawful to do so should the building not meet these new minimum EPC requirements.

3. THE MINIMUM ENERGY EFFICIENCY STANDARD FOR NON-DOMESTIC (COMMERCIAL) BUILDINGS WILL BE SET AT AN E EPC RATING.

It is our understanding that this new rating will be based on C02 emissions for commercial property, this is the EPC graph displayed on the first page of the commercial energy efficiency certificate. Read the official DECC Government report for Non-Domestic buildings here.

4. THE MINIMUM ENERGY EFFICIENCY STANDARD FOR DOMESTIC DWELLINGS WILL BE SET AT AN E EPC RATING.

It is our understanding that this new rating will be based on Fuel costs rather than C02 emissions for domestic property. This is the EPC graph displayed on the first page of the energy certificate. Read the official DECC Government report for Domestic dwellings here.

5. THE EPC REGULATION CHANGES ARE MAINLY ABOUT THE ENERGY EFFICIENCY RATING OF BUILDINGS AND MEAN THAT A RATING OF F OR G COULD POTENTIALLY CAUSE PROBLEMS.

Potential issues could arise after 1 April 2018 when trying to let a house/flat or renew a commercial lease with an EPC rating worse than an E.

For the period Q1 2008 – Q1 2015, 35% of Non-Domestic buildings which had an EPC survey carried out were achieving an E, F, or G rating. For the same period, 26% of Domestic properties achieved an E, F or G rating. This official Government data suggests that a significant proportion of the UK building stock could be affected by the new energy performance regulations.

6. THESE NEW MINIMUM ENERGY PERFORMANCE STANDARDS (MEPS) WERE RELEASED BY THE DEPARTMENT OF ENERGY AND CLIMATE CHANGE (DECC) ON 22 JULY 2014 AND CONFIRMED BY THE GOVERNMENT ON 5 FEBRUARY 2015.

The Government considered the views of a variety of individuals and organisations across England and Wales on the issues surrounding EPCs before deciding on the details of the new regulations which are designed to help the Government meet their obligations set out in the Energy Act 2011 to improve the energy efficiency of property within the privately rented sector.

7. THE NEW EPC REGULATIONS WILL COME IN TO FORCE FROM 1 APRIL 2018 AND WILL REQUIRE ELIGIBLE PROPERTIES TO BE IMPROVED TO A SPECIFIED MINIMUM STANDARD.

The new regulations apply to Non-domestic property, defined by the Energy Act 2011 as any property let on a tenancy, which is not a dwelling. All commercial property types from A1 – D2 usage class are in scope of the regulations, with the exception of those excluded from existing Energy Performance Certificate (EPC) regulations.

The regulations apply to Domestic property, defined in section 42 of the Energy Act 2011 as properties let under an assured tenancy for the purposes of the Housing Act 1998, or a tenancy which is a regulated tenancy for the purposes of the Rent Act 1977. There are also however, some exceptions where a domestic property would be exempt from requiring an EPC.

Confused still? Want to know what all this means for your property?

The best thing to do is to speak with a local energy assessor in your area, they will be able to offer you tailored expert advice and provide you with an EPC if you need one. Here’s some useful links, click them and pop in your postcode to find a local expert:

List of Residential Energy Assessors >

List of Commercial Energy Assessors > (Hint: Search for EPC Level 4 in the dropdown)

If you’re in the Midlands and require a commercial EPC, feel free to contact us, we’d be happy to help!
 

 

Commercial EPCs & how the 2018 changes affect agents & landlords

We’re finding many of our clients have little understanding of how the Energy Performance Certificate 2018 regulation changes will affect both their landlord clients and themselves.

This guide aims to summarise the key changes and keep those who need to know, in the know.
This article builds on the 7 things you need to know about the 2018 EPC changes blog post we produced to give a high level overview of the key issues surrounding the changes applying to both residential EPCs and commercial EPCs.

This article is written with a specific focus on commercial real estate and summarises the report from the Department of Energy & Climate change on the new 2018 EPC regulations.

WHAT IS CHANGING?

From 1 April 2018, the minimum energy efficiency standard will be set at an E, meaning that commercial property with an EPC rating of F or G will require improvements to the buildings to improve the energy efficiency rating before a lease can be granted.

The 2018 EPC regulation changes will apply upon the granting of:

  • a lease to a new tenant, and,
  • a lease to an existing tenant.

WHAT TYPE OF COMMERCIAL PROPERTY DOES IT AFFECT?

The regulation changes will apply to the non-domestic private rented sector in England and Wales. As defined by the Energy Act 2011, this will be any property let on a tenancy, which is not a dwelling. The existing exemptions will remain applicable.

ARE THERE ANY EXEMPTIONS TO THE NEW 2018 EPC REGULATIONS?

Only cost effective, permissible and appropriate improvements are required under the new regulations. If a landlord can provide suitable evidence of the following, then they will be eligible for an exemption from their commercial building reaching the E minimum rating:

  • If the improvement measures are not cost-effective, and do not pay for themselves within 7 years, or do not fall in line with the Green Deal’s Golden Rule which states ‘The expected financial savings must be equal to or greater than the costs attached to the energy bill’.
  • If, despite reasonable efforts, the landlord is unable to obtain the necessary consents from tenants, lenders or superior landlords to install the required energy efficiency improvements.
  • If a ‘relevant suitably qualified expert’ can provide written advice stating that the proposed energy improvement works will have an adverse affect on the value of the property by 5% or more.
  • If a ‘relevant suitably qualified expert’ can provide written advice that insulation applied to walls will damage the property.

WHY DOES IT AFFECT COMMERCIAL LANDLORDS?

The reason is because it will be the landlords responsibility to take action to ensure that if they wish to lease their commercial property, that the energy efficiency rating falls between the A – E EPC ratings.

If the energy efficiency improvement works are cost effective, permissible and appropriate, then it is up to the landlord to make arrangements to get the works done.

If a landlord feels that their property is exempt, and that they should be allowed to lease their commercial premises, even with an F or G rating, then they can apply to notify this on a centralised register – the Private Rented Sector (PRS) Exemptions Register.

WHY DOES IT AFFECT COMMERCIAL AGENTS?

As an agent, if your clients properties are non-compliant then you will not be able to lease them until they are. The time taken to make improvements could cost both you and your clients lost revenue. Commercial real estate agents are in a good position to advise landlords of the changes to ensure they have awareness of:

  • the general legislation on the EPC regulation changes in 2018 and their responsibilities.
    when the changes will apply, giving them time to make any required changes to improve the energy efficiency of their premises
  • what they can do / need to do if their property does not achieve an E rating or better
    the Private Rented Sector (PRS) Exemptions Register

WHAT ARE THE PENALTIES FOR NON COMPLIANCE?

If a landlord has a commercial property that falls in the scope of the regulations, but the landlord has not ensured that their property is compliant, or has not sufficiently proved an exemption, then a Local Authority is within its power to serve a compliance notice on the landlord requesting that further information is sent to them to confirm compliance.

  • If this information is not provided or does not prove compliance, then a penalty notice may be issued. The landlord will have the right to appeal a penalty.
  • The penalty is £5,000 for providing false or misleading information to the PRS Exemptions Register, or for failing to comply with a compliance notice from a Local Authority.
  • The penalty for renting out a non-compliant commercial property is as follows:
  • Less the 3 months non-compliance: 10% of rateable value, subject to a minimum fine of £5,000 and a maximum fine of £50,000.
  • More than 3 months of non-compliance: 20% of rateable value, subject to a minimum fine of £10,000 and a maximum fine of £150,000
  • Publication of non-compliance will apply to both timeframe offences.

Confused still? Want to know what all this means for your property?

The best thing to do is to speak with a local energy assessor in your area, they will be able to offer you tailored expert advice and provide you with an EPC if you need one. Here’s some useful links, click them and pop in your postcode to find a local expert:

List of Residential Energy Assessors >

List of Commercial Energy Assessors > (Hint: Search for EPC Level 4 in the dropdown)

If you’re in the Midlands and require a commercial EPC, feel free to contact us, we’d be happy to help!