Commercial agents and landlords warned of energy efficiency regulation changes

Commercial agents and landlords warned of energy efficiency regulation changes

8:03 AM, 24th November 2022, About 2 weeks ago 19

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Propertymark is warning commercial letting agents and landlords about a change in energy efficiency regulations for business buildings.

They say that from 1 April 2023, the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 will apply to all tenancies, including those that are currently existing and ongoing tenancies.

The rule change will mean that landlords will not be able to continue to let a non-domestic property which does not meet the minimum standard rating of ‘E’ unless there is an exemption which has been registered.

‘Responsibility on landlords to make energy efficiency and heating improvements’

According to the government’s Heat and Buildings Strategy ‘around 40% of all energy consumed in commercial and industrial buildings in England and Wales is in the rented sector, placing more responsibility on landlords to make energy efficiency and heating improvements.’

In response to this, Propertymark has created a series of answers to FAQs to support their members and, in turn, their landlords which include details of the exemptions and enforcement.

‘Best to consult their local EPC assessors’

Anthony Meadowcroft, the NAEA commercial president, said: “Landlords that need an EPC will be best to consult their local EPC assessors in preparation for any effected change, along with planning if there are any energy efficiency upgrades required.

“As some commercial tenants have in place Full Repairing and Insuring (FRI) leases that put maintenance responsibility onto commercial tenants, there needs to be a strong and transparent re-enforced message that this change will indeed have to be actioned by the landlord and not fall onto the tenant.”

Energy efficiency changes in commercial buildings

Propertymark members can access the FAQs about energy efficiency changes in commercial buildings by logging into the site’s member area.

The organisation also held an Assessing Commercial Property and Business Values webinar on 15 November where attendees discovered how current factors such as inflation and cost of living may have a knock-on effect on sellers pricing and buyer demand in both the leisure and retail markets. Agents can also download a recording of the webinar.



Comments

Beaver

16:24 PM, 24th November 2022, About 2 weeks ago

Reply to the comment left by Darren Peters at 24/11/2022 - 15:06
A friend of mine recently signed up to a council scheme to get a discount on solar panels for his own home...the idea was to buy in bulk in order to get the discount. When he got the quote it was £9,000 (without the battery). By the time he added up everything he was going to have to pay for it was going to take 30 years to pay back. He's over 60. Another friend managed to install solar himself for £7,000 about 2 years ago I think. So there didn't seem to be much of a discount and in any case he was never going to benefit; so he didn't bother with it.

By the time you've paid for the photovoltaics, heat pump(s), plumbing, electrics, batteries insulation etc. I reckon you'd be looking at at least £30K per rental property at band D.

Does anyone on here know how much of this expenditure can be written off as revenue expenditure? Or if you go ahead with it do you have to finance it all through further borrowings at higher interest rates?

Beaver

16:33 PM, 24th November 2022, About 2 weeks ago

Reply to the comment left by John Grefe at 24/11/2022 - 16:06
So that's £40K plus additional costs in the property for lowering ceilings, decorating etc. I'm guessing that will be a further £20K. So if that's not tax deductible (against rents not CGT) and because those works would be so disruptive for most of us with Band D properties the consequences will be:

(1) End present tenancy and remove present occupants, and;
(2) Stop renting the property out permanently and do something else with it, or;
(3) borrow more money, make the improvements to the property, and;
(4) put new tenants in at a much higher rent.

So we are looking at a big hike in rents because some properties will be taken off the rental market exacerbating the supply problem and others will go back on the market at a much higher rent to cover the increased cost, risk and the extra void period.

I think if someone wants to look like they are trying to save the planet they need to change the tax system. If I was 73 I would at least be looking for a credit against my inheritance tax bill.

John Grefe

16:43 PM, 24th November 2022, About 2 weeks ago

Hi again.re: Beaver,; Unfortunately I won't benefit from any inheritance tax relief! But I think the point has been missed, we need to do something about our climatic problems. The war in Ukraine has highlighted the our dependence on fossil fuels?

Darren Peters

16:43 PM, 24th November 2022, About 2 weeks ago

Reply to the comment left by Beaver at 24/11/2022 - 16:33
Surely renovations done to a property to ensure its legal compliance to EPC is a _necessary_ repair rather than an optional improvement?

In the same way as replacing old rotten single pane sash windows with FENSA compliant double glazing is allowed as a repair because that is the legally required standard (leaving Listed buildings aside).

Rob Crawford

18:00 PM, 24th November 2022, About 2 weeks ago

Reply to the comment left by John Grefe at 24/11/2022 - 12:41
You may now find that whilst your property is improved interms of carbon emissions, it will have a negative impact on an EPC rating!

Beaver

18:06 PM, 24th November 2022, About 2 weeks ago

Reply to the comment left by Darren Peters at 24/11/2022 - 16:43
Don't know. I think a lot of this at the moment is capex that will only go to reducing your CGT bill when you sell and cannot be offset against your rents. If anybody else knows better feel free to correct me.

Paul Essex

9:32 AM, 25th November 2022, About 2 weeks ago

I know I have said this before but payback time is only for owner occupiers. In a rental situation the payback is only achieved by raising rents.
The irony is that tenants will thus not financially benefit from any of these improvements, and are likely to be worse off as we will probably want the investment back rather sooner than 20-30 years.

You may disagree but are you really going to give your tenants an interest free five figure loan over that time period?

Tom Pope - Energy Report Ltd

8:31 AM, 26th November 2022, About 2 weeks ago

Reply to the comment left by Darren Peters at 24/11/2022 - 16:14
Unfortunately the only reliable way of detailing what is required for a commercial building to meet a specific EPC rating is to have the building assessed by an accredited EPC assessor, this does not have to involve producing an EPC, but just a draft. A reputable company will be able to offer several options on how to improve the rating to the desired level. We do this for a number of clients who find that their properties and not meeting the requirements or are looking to mitigate risk into the future. Running a business doing this, I am obviously more than happy to help.

Tom Pope - Energy Report Ltd

8:40 AM, 26th November 2022, About 2 weeks ago

There is a fair amount of confusion with regard Minimum Energy Efficiency Standards for commercial buildings, this I believe is mainly due to the standards being slightly different between residential and commercial, EPC assessment methods different and dates of compliance being different between the two. On top of this, the update to Part L of building regulations this year has altered the actual rating of a commercial building, so that old ratings pre June 22 may well be different to new ratings post June 22. This works both ways so the rating could improve or deteriorate.

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