At a glance
- Energy Performance Certificates (EPC) have never been so important for tenants and property owners
The clock is ticking for groups involved with commercial property. Both occupiers and owners are encouraged to review the energy performance of their buildings, without delay, to avoid paying over the odds for either rent or compulsory improvements respectively.
Provisions of the Energy Act 2011 mean that, as early as April 2015 in Scotland and April 2018 in England and Wales, it will be illegal for owners and occupiers to let buildings that score Energy Performance Certificate (EPC) ratings below an E (rating F or G). The legislation is “a very significant consideration indeed for those who occupy, sub-let or own a single commercial property, and a potential time bomb for those who own a portfolio of commercial property,” says Ruth Gilbody, Commercial Director, 4See Environmental, a consultancy that employs chartered surveyors and chartered engineers to get to the root of any environmental shortcomings.
Ruth is also quick to implore brokers to discuss the issue with any customers who the legislation may apply to. “As a broker, you have a vital role to play in getting the word out about this, because it’s a sophisticated message. Depending on the customer’s property-ownership status, the Act will potentially affect them in different ways. The Energy Act also offers you the chance to demonstrate to your clients your aptitude as their professional risk adviser and your commitment to keeping an eye on what lies on the risk horizon for them.
“This is a new area of risk and exact details of the Energy Act are still to be confirmed. However, there is no doubt that there will be a significant risk for both Real Estate and Corporate customers. That risk needs to be quantified now.”
The impact on commercial property tenants
“An immediate practical example,” says Ruth, “is that if there were an open market rent review on a G-rated building, when other local property units which are otherwise similar and have much better EPC ratings, there is already scope for a well-advised tenant to argue with the landlord for a discounted rent.”
The impact on commercial property tycoons
Commercial property tycoons should not assume that all properties with an F or G ratings are likely to be equally affected, but should seek professional help to identify those properties where the impact will be most severe.
This includes properties which will not be improved during their natural cycle or which are incapable of improvement at an affordable cost. The costs associated with improving the buildings to the required standard can then be quantified relatively, and a strategy put in place from a position of strength.