Nearly a fifth of commercial buildings could be barred from being let after 2018 due to poor energy efficiency standards, according to a new property report.
Minimum standards for the non-domestic private rented sector are due to come into force in 2018, with the government stipulating that commercial properties must reach an EPC rating of E before they are able to be let. The standards are to be applied upon the granting of a lease to either a new or existing tenant and unless the properties are up the standard, it will be unlawful for them to be leased.
According to research by Cushman & Wakefield’s project management and consultancy team, 20% of properties currently fall in the F and G brackets, meaning they will need to be brought up to scratch by 2018.
A further 19% are rated ‘E’, just above what will be the legal cut off, but with expectations that the EPC rating system will be improved in the near future, these too could face consequences from the new standards.
A range of monetary penalties could be enforced, including a £150,000 fine for properties rented for three months or more without the necessary EPC performance.
Alan Somerville, head of strategic energy and sustainability at Cushman & Wakefield, added: “Investors need to act now. Although 2018 may seem some way off, given the time needed to identify where building efficiency upgrades are needed and to ensure the work is completed, delaying this process could prove very costly.”
During the government’s consultation period in 2014, many respondents expressed concerns over how the work would be funded. This meant the several exemption rules were included, but landlords are expected to sign up to a register to be launched later this year.
The Green Deal was intended to provide some level of support outside of its domestic remit, however the cessation of funding for the Green Deal Finance Company means this is currently no longer an option. However, this will have a significantly bigger impact on the private rented domestic market which has similar standards coming in at the same time.
Currently, commercial properties over 50m2 only require an EPC when sold or rented with no legal obligation for landlords to carry out any efficiency improvements.
