New Energy Performance Certificate Requirements - What you need to know
Energy Performance Certificates have been a part of both the commercial and residential sales and letting process for over 10 years. They must be obtained at the outset of any contemplated transaction and be provided to a proposed purchaser or tenant, ideally as part of the marketing brochure.
Certificates provide an energy rating for the property between A to G, with an A rating being the most energy efficient. They also provide recommendations for improving the energy efficiency of the building suggesting, for example, new insulation.
New guidelines were recently published in relation to the commercial sector. These take effect from 1 April 2018 and importantly cover both commercial and domestic properties which are rented out.
So what are the changes?
Previously, certificates have acted as a guide only with proposed recommendations. From April 2018 owners of premises that fall into the lowest two ratings of F and G will need to carry out improvements to improve the rating to at least band E.
Practically speaking, the effect of the new rules will mean that, where properties fall below the minimum energy efficiency standard, landlords will be unable to:
- grant a new tenancy or renew an existing tenancy of a private rented property after 1 April 2018;
- continue to let a residential private rented property after 1 April 2020; or
- continue to let a non-residential private rented property after 1 April 2023.
In addition if tenants wish to undertake improvements to properties in order to improve the energy efficiency then, under the regulations (subject to some exceptions) the landlord’s consent cannot be unreasonably withheld.
Lenders may also be unwilling to accept properties in the lower two bands as security for a loan. This is likely to have an impact on the availability of finance. Alternatively a tranche of the funding may be withheld until improvements are undertaken to bring the property up to at least the minimum acceptable energy efficiency standard. In short, there may be significant delays or expenses to be incurred when obtaining finance for low ranking properties.
Whilst new construction techniques and planning requirements will mean that new developments already comply with these new requirements it is estimated that approximately 20% of privately rented residential properties will not meet the new requirements. It is recommended therefore that private landlords assess the energy rating of their premises as soon as possible to ensure that they comply with the guidelines for when they take effect in April 2018.
For more information on the new energy efficiency guidelines and how it may impact you or your property, please contact Ian Leigh on 020 7462 6962 or il@cbglaw.co.uk