Almost a fifth of all the commercial property owners in the UK will be required to make improvements to their buildings to comply with new government energy standards. Failure to comply will see property owners run the risk of being barred from letting their properties.
The Energy Act was passed in the last Parliament and it includes rules that come into play in 2018. These new rules state that it will be unlawful to rent out a business property which does not meet the minimum energy efficiency standard. This minimum standard is an “E” rating with “A” being the highest possible efficiency rating.
Research has found that nearly 20% of all commercial property currently has a rating of “F” or “G” which means they will have to make an improvement before 2018 to avoid penalties and the risk of no longer being able to rent out their property.
Another 19% of properties are currently rated “E” which sees them teetering on the brink of compliance. The research categorised nearly 40% of all properties as potentially running into a performance risk if changes aren’t made before 2018.
From 2018, buildings that do not meet the minimum Grade “E” standard will be classified as ‘substandard’ which will affect the value of the property and also place owners in the firing line of penalties up to £150,000 if they do not comply.
The current guidelines require landlords renting out commercial property over 50 sq. m in size to have a government-approved energy performance certificate but they do not need to meet a specific Grade “E” standard and there is no obligation to carry out improvement works. It is very likely both landlords and property owners will be concerned about the level of change they need to make and the costs involved to comply with the legislation which comes into effect in just over two years time.
So what does that mean? - Offering an attractive prospect to potential tenants means ticking every box and from 2018 this includes meeting the minimum energy efficiency standard.
Be mindful of the changes and obligations to meet Legislative requirements under leasehold covenants if you are leasing premises prior to the 2018 deadline.
If you are looking to shift or change premises, it is one of many considerations to bear in mind that can provide a powerful lever to achieve competitive terms.
The message is simple - " Don't miss the significance of this change "
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