It may seem a long way off, but from April 2018 it will be unlawful to let a commercial or residential property that has an EPC rating of F or G. This restriction will be enforced by local authorities civil penalties will be imposed for non-compliance (up to £5,000 for residential properties and with no current limit on commercial properties).
So why is this important? Well, property owners may need to make improvements to the property before marketing them. If the property is unmarketable as a result of a poor energy efficiency level then this will have a significant impact on its value.
Property owners also need to consider what impact this could have when dealing with rent reviews of leases where the term carries on beyond 2018.
It is not clear whether the Regulations will apply to the grant of a long lease at a premium. It is also unclear as to whether the restrictions will have a retrospective effect with regard to existing leases. If landlords will be required to carry out improvement works to properties subject to existing leases, then how will this work in practice? Will the landlord have the right to enter the premises without breaching the quiet enjoyment covenant? What consents will the landlord require before carrying out the works?
Landlords should therefore carry out a review of their portfolios to ascertain whether there are any properties with an EPC rating of F or G. If any such properties are identified, then landlords will need to consider what works must be carried out to improve the EPC rating.