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Wednesday 25 February 2015

Is it F-off for Landlords?

New draft legislation was published earlier this month which would make it illegal after 2018 for a landlord to let a commercial building with an EPC rating of F or G. The aim is to force landlords to improve the energy efficiency of their buildings (around 18% of commercial buildings have F or G ratings).

If enacted, the legislation will not invalidate a lease that is granted of F or G rated premises, but it will make the landlord liable for a fine which could be as much as £150,000.

In 2023, the legislation will apply to all leases whenever they were granted.

On the face of it there seems to be no reason why a tenant of a building who wants to sub-let will not also be caught by this legislation.

There will be some exemptions and concessions which will become clearer in due course. We know one of these will apply if it is not cost effective to carry out energy improvement works.

Legislation covering this has been likely for quite some time but this draft puts some flesh on the bones. The May election might postpone it, but as the move is driven by Europe it seems very likely legislation along these lines will be in force in the not too distant future. So a purchaser who is now looking to buy a “substandard” building (i.e. one with an F or G EPC rating) should consider very carefully how much it will cost to bring the building up to a satisfactory rating of E or above. Lenders will also be concerned.

Mark Lavers
Real Estate

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