Could new energy efficiency standards leave landlords with ‘unrentable’ real estate?

Could new energy efficiency standards leave landlords with ‘unrentable’ real estate?

In six months’ time new Minimum Energy Efficiency Standards (MEES) will be in place – a sweeping change scheduled for April 2018, barring new or renewed leases on commercial property with Energy Performance Certificate (EPC) ratings of F or G.

Landlords with commercial portfolios should prepare diligently, or risk significant loss of rental income. We’ve compiled some tips to help you prepare your property for these changes.

Maintaining an organised property database

A complete list of property assets, with detailed records of current EPCs, is paramount for MEES compliance. This can be maintained through clear communication with all parties involved in changes to your portfolios, keeping you fully aware of sales, refurbishments or tenancies.  
A careful record of tenant movements will enable an accessible and useful asset list with accurate data. This will help avoid any wasting of time or effort when collating data.

Good EPC records detailing ratings, expiry dates and addresses are an absolute requirement. Take note that EPCs can be commissioned by anyone – yours may not be the most recent on a property.  

Commission new EPCs

EPCs evaluate the characteristics of a building and its services, from heating and ventilation to air conditioning and lighting, but assessors often lack detailed property information.

Thus they need to gather information during site visits, modelling their findings before determining the EPC rating. For various reasons EPCs are sometimes based on assumptions, conventions and defaults which imagine worst case scenarios. These don’t always provide an accurate representation of buildings’ statuses.

Before refurbishing a sub-standard property, we would recommend that its building energy model is reassessed to eliminate as many estimates as possible and improve the EPC rating.

Cast your net widely

There are other factors to consider, to ensure a full understanding of your risk exposure:

Listed Buildings. There is an urban myth that listed buildings do not require EPCs. In fact, they are most likely to earn EPC F and G ratings because of their poor fabric specifications for energy performance (single glazing, uninsulated walls etc).


E-rated buildings. EPCs are linked to the regularly-updated and strengthened UK Building Regulations, Part L. In revisions to come EPCs with asset ratings with a rating of E may find themselves in the F & G bands once the current certificate has expired.

Rental Values. If refurbishment is abandoned and an unacceptable property offered for rent, landlords won’t be allowed to market buildings, which can only lead to a loss of rental income. Rental values per square metre, per annum should be accounted for, to ensure correct risk assessments and highlight needed improvements.

Be efficient

Many owners aren’t sure about their MEES compliance risk, so undertaking a review is vital. You can save time and money by also commissioning reviews of additional environmental compliance risks.

For example, our ever changing climate often highlights the need to understand flood risk. Property owners need to understand such risks to protect against business threats and develop plans to guarantee business continuity.

MEES, however, provides the perfect opportunity to ask further questions about the environmental legislation agenda. Property environmental compliance risk exists in many areas including air conditioning inspections (ACIs), ESOS energy audits and asbestos registers among others.
As well as giving a useful assessment of regulatory and non-mandatory environmental risks, high level reviews also highlight opportunities such as solar PV installation, that impact on the wider business.

Look forward and protect yourself

Whenever the opportunity arises, property owners should look to introduce provisions in leases preventing tenants from carrying out alterations that adversely affect energy performance. You may also wish to restrict a tenants ability to commission its own EPC, as these invalidate existing certificates.
Equally, the new regulations present an opportunity for greater cooperation with tenants through the adoption of green leases.  A green lease is a standard form lease, with additional clauses included to provide for the management and improvement of the environmental performance of a building. Owners and occupiers can decide on carbon, energy, waste and water reduction tactics that most suit the individual circumstances of properties.

Conclusion

These strategies represent some of the ways that landlords can protect themselves and guard their portfolios ahead of the implementation of MEES. If followed, they could help landlords to not only scrape by the minimum requirements for compliance, but also lead the way in both property and asset management in relation to environmental preservation.

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Scott Garnet
Scott Garnet 06 Nov 2017

If you have a patio or a porch it is important to make sure that any connecting doors are secured. Good advice for sliding glass doors is replacing the panels with storm resistant glass and getting heavier...

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richardrawlings
richardrawlings 01 Nov 2017

What has not been mentioned here is the effect of not only higher interest payments, but also that these payments are less likely to be offsettable as a business cost due to the scaling back of mortgage...

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Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

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maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

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maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

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zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

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Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

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Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

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Chris
Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

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