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Letting property with a low EPC rating

Alternative Energy Blur Business 1076807

Back in March I wrote about the new Minimum Energy Efficiency Standards (MEES) that commercial property landlords were required to meet from 1 April 2018.

Some landlords are only now discovering that if they have property with an EPC rating of ‘F’ or ‘G’ they could face a heavy fine if they let that property or face tenants unwilling to take it on.

The guidelines for improvements will be set out in the EPC. However, there are a number of exemptions to MEES regulations that landlords need to be aware of.

1. The ‘seven-year payback’ test
Improvements to the energy efficiency of commercial property needs to be cost effective. The test is whether the capital costs of energy improvement works would be cost effective within a seven-year period.

2. Property devaluation
A second exemption would be where energy improvement works would devalue the property by five per cent or more. A likely scenario is that energy improvement works reduce the amount of lettable space. Devaluation would need to be supported by valuations evidence.

3. No relevant consents
A landlord must be able to demonstrate that ‘reasonable endeavours’ have been undertaken to obtain relevant consents should they not have been able to carry out the works. This ‘third party consent’ could, for example, be from tenants or mortgagees. It would be advisable to attempt to obtain consent multiple times.

4. Exceptional circumstances
A temporary six-month exemption can be granted for exceptional circumstances, for example where there is a new landlord.

Exemptions are rare and it is advisable that landlords make every effort to carry out the works as advised in the EPC.
If you believe you have grounds for an exemption, these must be registered and they are limited to a maximum period of five years.

To discuss any aspect of the MEES legislation, please call me on 0161 672 1442 or email richard.bradbury@slaterheelis.co.uk

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