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Commercial landlords face heavy fines - new law due in April

epc rating

The UK government has committed to its targets to reach net zero emissions by 2050. As part of this initiative the Government is looking to reduce emissions across a wide range of sectors, including commercial and residential property. From April 2023 new rules on energy efficiency will come into force in England and Wales which will affect anyone planning to let out or sell a commercial property.

From 1 April 2023 - next month - it will be a legal requirement for ALL commercial rented properties to have an EPC (Energy Performance Certificate) rating of at least E.

There is currently a legal requirement for commercial and residential properties before they can be let on a new or renewal lease, but from 1 April this requirement will apply to both new and existing commercial leases.

Energy Performance Certificates (EPCs) are intended to measure how energy-efficient a property is on a spectrum of from A (most efficient) to G (least efficient). They are also intended to show the potential level of emissions and associated costs of improving the rating for a property. Owners must by law obtain an EPC whenever a property is built, sold or rented.

It is inevitably the case that some landlords, owners of residential and commercial properties will face potentially large costs in upgrading older property stock to be compliant with the Minimum Energy Efficiency Standard (MEES) regulations for residential and commercial properties.

April 1, 2023'�s EPC legislation changes will mean that non-domestic (commercial) property owners will now be brought into line with the rules for domestic (residential) property and owners could face fines of up to �150,000 if they don'�t comply.

A timely reminder

Commercial property landlords are being reminded here, and urged to adhere to the new regulations affecting their properties, to get their properties up to standard, or face thousands of pounds of fines.

Lincoln Smith, Managing Director of Rugby-based heating, plumbing and electrical business, Custom Heat, says:

"We're concerned that the changes to the legislations aren't '�common knowledge'� meaning that hundreds of landlords across the region may face fines of thousands for very avoidable property issues."

Changes will mean it will become unlawful for a landlord to "continue to let" a substandard property unless they have made all possible cost-effective energy efficiency improvements prescribed by MEES, ensuring all rental properties have an Energy Performance Certificate (EPC) rating of E or above.

The government is making an amendment to the MEES regulations next month, which in basic terms means that any commercial property with an EPC rating of F or G will be considered '�sub-standard'�, and therefore they could be liable to fines of thousands of pounds, fines which are avoidable with the correct action by owners.

There are concerns that some or all of these new requirements are not common knowledge and therefore some owners are vulnerable and will be in breach of the rules after 1 April 2023.

Mr Smith continues, given his knowledge of the situation on the ground:

'We have already spoken to dozens of landlords who we have previously worked with and they didn'�t know about the changes, so have enlisted our help to get their properties up to standard, which has been anything from modifications for heating, lighting and ventilation to adding internal insulation, floor insulation and improved heating controls. So if they don'�t know about it, we are concerned others don'�t too, and time is running out."

Mark Shimwell is the CEO of NHBC Registered building firm, Middlemarch Construction, based in Rugby. His firm specialises in barn conversions, Listed Buildings work, new dwellings and extensions, commercial buildings and property renovation. His firm is also responsible for the sympathetic restoration of many listed buildings in the Midlands. Mr Shimwell has also said that he is worried about the lack of concern by some owners.

Mr Shimwell goes on to say:

"There is a worrying lack of awareness among landlords about upcoming changes to EPC regulations. Custom Heat has helped me prepare properties for the changes by installing energy efficient lighting, heating and ventilation.'�

The legislation states that landlords who fail to comply could be looking at fines of a minimum of �5,000 for non-compliant properties let for less than three months. When non-compliance extends beyond a three-month period, penalties could reach 20% of the rateable value of the property with a minimum fine of �10,000 to a maximum of �150,000.

Mr Smith explains:

'Budgets are tightening and with prices rising as a result of the cost of living crisis, it is crucial that landlords consider MEES compliance in their financial planning and ensure they do not let it fall down the priority list and risk significantly devaluing their assets."

'We must stress though that we do support this legislation change as it plays an important role in achieving the government'�s goal of Net Zero by 2050, we just want to make sure that landlords are ready and make the change now."

The next phase

The intention, as part of the transformation of the UK energy system and the delivery of Net Zero, is that all rented non-domestic buildings achieve an EPC of C by 2027 before attaining B by 2030. On current assessments, only 12% of all registered commercial properties are said to meet this criteria: the country has a long way to go and a considerable amount of up-grade work needed to meet this goal.

Which tenancies does MEES apply to?

If an EPC is not currently in place, the requirement is activated when particular alterations are made, if a new property is constructed or if a property is sold or rented. The certificate is valid for ten years from the date of registration and is placed on the EPC register.

MEES applies to all domestic and non-domestic properties that are let pursuant to either an assured tenancy or a regulated tenancy, a domestic agricultural tenancy or a commercial property lease and are legally required to have an EPC.

If the tenancy is over 99 years or less than six months for a commercial lease then the regulations do not apply.

The requirement to get an EPC (if one is not already in place) is triggered when certain alterations are undertaken, on the construction of new properties and where a property is sold, assigned or rented. The EPC certificate is issued by an assessor and is valid for 10 years from registration on the EPC Register.

Custom Heat was founded in 1980 as an independent family business based in Rugby, Warwickshire, operating across the East and West Midlands, into Gloucestershire and Oxfordshire and serving the whole of Cornwall. Its services for home and commercial properties include installations, services and repairs for gas, oil and LPG heating, plumbing and electrical, renewable solutions and air conditioning. The company also offers boiler care plans.

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