Will an EPC rating of F or G prevent a letting?
Author: Emily White and Sophie Wilkinson
There are widespread concerns that from April 2018 it may be unlawful to let residential or commercial properties with an EPC rating of F or G.
The concerns stem from provisions contained in the Energy Act 2011.
These require regulations to be made that prevent a landlord of residential or commercial property falling below a certain level of energy efficiency from letting the property until it 'has complied with the obligation to make such relevant energy efficiency improvements' as are provided for by the regulations.
The relevant energy efficiency improvements mean those which can be paid for pursuant to a Green Deal plan or financed in some other way as may be specified by the regulations. A Green Deal assessor will make the recommendations about which measures are suitable for a property.
This will depend on a number of factors, including the energy efficiency improvements already undertaken and the characteristics of the building.
Without further detail and with a quantity of commercial property stock rating at an EPC F or G grade, it is not surprising that concerns abound as to their future letting potential.
Is there any comfort for landlords?
There is some:
. The 'non-domestic energy efficiency regulations' required under the Energy Act 2011 have not been issued and do not need to come into force until 1 April 2018. At present we cannot be sure at what level the minimum energy efficiency standard will be set. So far, guidance from DECC has suggested an E rating, but this could change.
. A landlord will have complied with its obligation to make relevant energy efficiency improvements if they cannot wholly be paid for under the Green Deal plan (or otherwise financed in accordance with the regulations).The key principle of the Green Deal is that energy efficiency improvements to properties should pay for themselves through savings in energy bills.
. The regulations may provide for exemptions which relate to necessary permissions or consents or where the improvements could have a negative impact on the value of the property. This means that the Secretary of State could provide that a landlord is not required to make improvements if he cannot obtain consent which is required to be given by the freeholder, or, for example, where listed buildings consent cannot be obtained.
The current uncertainty will inevitably mean concern over the future letting potential of less energy efficient properties.
The picture may not be as bad as that which has been painted in some quarters, but property owners should remain aware of government focus on energy efficiency and the implications this has for property management.
In practical and commercial terms, the most suitable time for a landlord to incorporate energy efficiency improvements is as part of refurbishment for proposed lettings.
It makes sense to try to reduce energy costs, irrespective of the reduction in carbon emissions that this would create, and with the impending introduction of regulations that will have a potentially restrictive effect on letting, landlords may be wise to include energy efficiency improvements where they can as part of their ongoing maintenance and plant renewal programmes