For private properties required to have an EPC certificate:
- From 1 April 2018 it will be unlawful to grant a new lease of residential or commercial property with an EPC rating of less than E.
- From 1 April 2020 the above restriction will apply to all residential lettings (whether new or existing)
- From 1 April 2023 it will apply to all existing commercial lettings.
Leases granted in breach of the regulations remain valid but substantial financial penalties will be incurred both in relation to commercial and to residential properties.
There are, of course, a number of exemptions to the requirements:
- The seven year pay-back test (capital cost of the energy efficiency measures must be recovered though savings over a seven year period);
- Third party consent (despite reasonable endeavours necessary third party consents cannot be obtained);
- Devaluation (changes required to comply would reduce the property value by 5% or more); and
- Recent Landlord (six month exemption available to new Landlords in certain circumstances).
There are however some key points to note about the above exemptions:
- Exemptions need to be registered before 1 April 2018 (the government will, apparently, be opening a register of exemptions – “the PRS Exemptions Register” which will be accessible from the gov.uk website – from 1 October 2017 and there is already in existence a “pilot scheme,” accessible by the same route, for commercial properties entries on which will automatically carry over onto the main register as and when it is opened);
- Exemptions will only last for 5 years (after which a new application must be made); and
- Exemptions do not pass on a transfer of the Landlord’s interest in the property (ie the new owner will have to apply for a new exemption).
All of the above will make it increasingly onerous to let non-compliant properties (which is, no doubt, the intention). It will also mean that EPCs on properties being acquired will need to be examined with care.
The Property Team at Barrett & Co are experienced in acting for Landlords – both commercial and residential – on acquisitions and other more general management matters. If you need assistance, give us a call on 0118 9589711 or e-mail me at [email protected] to find out more or book an initial appointment.
I have written a book on Ten Common Mistakes Businesses Make with the Law. To download a free copy of the book go to Martin Reynolds' Book on Business Law.
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