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As a result of the COVID pandemic, the commercial property market is clearly going through a turbulent time. Across many regions there is an increasing amount of empty commercial space which is underutilised or waiting to be re-let.
So, what are your options if you are a landlord of an empty premises and feel you may struggle to find a new tenant?
You may decide to:
Whichever path you choose to take, one important thing is to consider that Government legislation now states it is unlawful to grant a new tenancy or extend an existing lease for a property with an Energy Performance Certificate (EPC) rating of F or G. There will be financial penalties for not complying with the legislation, therefore we recommend landlords carry out some simple checks.
If your property is empty, this may provide the ideal opportunity to carry out repair works to enhance the value of your assets and improve the energy efficiency.
Not just a tick box anymore
Checking your current EPC also highlights many issues to consider. Some historical EPCs have been found to contain inaccurate information which has contributed to properties having a poor energy rating. In the past, EPCs were seen by many as a ‘tick box’ exercise just to advertise the property on the open market and enable a lease to be signed. Many were obtained as economically as possible with little attention to detail and based upon wrong assumptions. This has left many properties vulnerable and dropped them unnecessarily into the danger zone.
EPCs were introduced in 2008 but only have a 10-year lifespan before they need renewing.
Who would have realised back then how EPCs would evolve and the importance they would play today?
Can you trust your current EPC?
How many landlords know if existing tenants have made any changes since the last EPC? Changes to service installations, including poorly performing air conditioning or inefficient electric heaters, can dramatically reduce the rating. We strongly urge landlords to review their current documents and, if necessary, commission new EPCs to ensure they accurately reflect the property.
Time is running out
The legislation will also apply to all existing commercial leases from April 2023. So even if you think the regulations do not affect you straight away, it is essential you properly plan to ensure you can continue to let your property in the future.
Looking further ahead
Given the Government’s recent announcement to support the UK’s net zero carbon target by 2050, the Government is currently consulting on bringing in tighter legislation by 2030. They are consulting on whether to make it unlawful to let a commercial property with an EPC rating below a C, or possibly even a B. It is worth bearing this in mind when reviewing your property management strategy.
Risks
It is already affecting valuations as many financial institutions are refusing to lend against sub-standard properties with an inefficient energy rating. Rent reviews may also be affected as tenants realise how uneconomical their building is to occupy. It is the landlord’s responsibility to ensure their property has a valid EPC, however many will be unaware of what their current EPC rating actually is. National figures suggest that up to a fifth of all non-domestic properties in England and Wales could be in the danger zone of F and G.
We can help
Property owners who find themselves in this situation with an empty, or soon to be empty, property would do well therefore to start to consider issues arising from the EPC rating of a property.
Although the regulations appear another burden for the landlord, I believe they should be seen as an opportunity to enhance the energy efficiency of their properties. Yes, there may be costs involved, however see this as a chance to make improvements to extend the long-term value of the building.
There are numerous exemptions and some of the legislation is complicated to navigate through. Robinson & Hall can help identify any buildings at risk, assess your property, implement a strategy to ensure your buildings comply with the regulations and advise upon the most cost-effective options. As well as energy efficiency, we can also assess whether you may be able to take advantage of the current permitted development legislation or potential development options.
For further information about how we can help you improve your EPC, please contact Robert Franklin on 01234 362917 / 07976 256586 or email rjf@robinsonandhall.co.uk.
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