Jeremy’s Jottings

The energy game changer.

During my career I have experienced some significant changes to property legislation. Frequently experts have claimed the impact would be the introduction of a two tier market. Inevitably this didn’t turn out to be the case. In previous jottings I have highlighted the introduction of the Energy Act to non-domestic properties In July the Department of Energy & Climate Change issued a consultation on the “Minimum Energy Efficiency Standard Regulations for non-domestic properties in England and Wales” (“MEES”). The consultation document is some 40 pages. Having taken time to consider the document, for the first time in my career, I’m of the view MEES is highly likely to lead to a two tier market. On this occasion the experts, at present, are silent.

In addition to being of the view MEES is highly likely to lead to a two tier market, dependent upon the economic cycle between 2018 and 2023, MEES has the potential to significantly impact upon the construction industry. Publication of MEES is anticipated early in 2015. An editorial I have seen suggested that if publication is delayed until after the election, dependent upon the make-up of the new government, the Regulations might be scrapped along with other “Green” initiatives.

Due to the relatively short timescale prior to implementation I am of the view it is likely to be better planning sooner rather than later. In my naivety I had assumed MEES was only to apply to lettings after 2018. For this reason it came as a surprise to find that Government is proposing a backstop date of April 2023 by which time all tenanted commercial property would have to be compliant. From the Energy Act I had understood MEES was to apply to the sale of non-domestic property. This does not appear to be the case. In essence, by introducing MEES, the Government is proposing to outlaw lettings of commercial properties with an energy performance certificate (EPC) rating of F or G from 1st April 2018.

Government believes this may affect as many as 18% of non-domestic property. Having said this there are an array of proposed exemptions. The consultation document is readily readable and I encourage you to do so. The document is at www.gov.uk/government/consultations/private-rented-sector-energy-efficiency-regulations-non-domestic. The consultation closes 11.45 p.m. Tuesday 2nd September.

In the meantime I leave you with the following questions: Green Deal finance is not yet available for commercial properties. Government’s expectation is that finance providers will come forward to meet demand. If you are a landlord would you be willing to fund improvements for no commercial return? The obligation to undertake work to improve energy performance rests with the landlord. If you’re a tenant how are you going to feel about the disruption whilst work is undertaken? Whether you are a landlord or a tenant how are the Regulations to interact with the security of tenure provisions of the Landlord & Tenant act 1954 Part II (as amended)?

If your property has not already got an EPC should you seek one now or is this an instance of ignorance may be bliss? To achieve UK’s legislative targets, CO2 emissions from all buildings must be close to zero by 2050. This implies in the longer term buildings will need to reach energy efficiency standards of close to an A EPC rating. How long will it be before the Government proposes to outlaw lettings of commercial properties with an energy performance certificate rating of say C, D or E? If you have proposals to improve and or refurbish your portfolio does it make economic sense to consider this now?

I could go on – when you read the consultation I think you’ll see why. It’s the intention to update clients as MEES become clear. If you would like to be included if you let me have your email address I will be happy to do so. In the meantime, if you would like free no obligation advice regarding your portfolio by all means give me a call to arrange an appointment.

Jeremy’s jottings do not constitute advice on any specific matter. Lawson Commercial recommends you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of the jottings.