New legislative changes to commercial properties with F and G energy ratings

Under new energy efficiency regulations to be introduced in 2018, commercial properties will have to comply with new stringent legislation – Craig Straw assesses the impact.

From April 2018, there will be new legislative changes which will make it unlawful to let commercial properties with an EPC rating of F or G – that’s the lowest two grades of energy efficiency.

For landlords or occupiers who wish to move space on, this will no doubt create some issues. It will not just affect some properties in terms of marketability – they simply won’t be able to be let at all unless they were upgraded to meet the minimum standards.

It is estimated around a fifth of non-domestic properties could be in the F and G rating brackets. Not only that but the new minimum standards could apply to all lettings and re-lettings, including sub-lettings and assignments.

Valuations and rent reviews of properties could also be affected if their marketability is diminished. Implications for dilapidation liabilities at lease ends could also exist.
This new legislation may seem a long way off, but it is already influencing decisions in anticipation of its introduction. It is vital that property owners and occupiers plan now to take action when the opportunity arises.

Recent Investment Property Forum research suggests that, for most building types, the EPC banding can be improved by increasing refurbishment costs by only 2 or 3%.

Property owners and investors need to address two things – firstly do you know the EPC rating on your building? If you don’t, you should find out and, secondly, utilise the time efficiently between now and 2018 to take advantage of void periods and undertake planned maintenance. If you don’t and you get to 2018 improvements to your F or G rated building – you will have difficulty letting or selling and could find that the impending legislation starts to affect you asset long before then...