Time to focus on energy
LAST year, the Government finally announced its plans to bring commercial property agents in line with the residential market by implementing changes to the law covering Energy Performance Certificates.
After a sceptical start, a number of landlords are now starting to see why they should be aware of the changes.
Simon Dare, an associate director at Innes England, said: "Energy Performance Certificates are a particular hobby-horse of mine, and as an energy assessor I am regularly the subject of my colleagues' jibes about the certificates and how pointless they are and that they just get in the way of doing deals.
"My response has always been 'Wait, they will become relevant. So get them sorted now'.
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"The changes in the past few months that require agents to have a certificate before marketing a commercial property have made people consider them more – and has also made me busier!
"However, there is another bit of legislation due to take effect from April 2018 which will potentially have a far greater impact. It is only just being taken note of by the property world.
"The Energy Act 2011 was given Royal Assent on October 18 last year and from April 18, 2018, it will be unlawful to let any property that fails to meet a minimum energy rating.
"What is not clear currently is exactly what the minimum rating will be. It is being speculated (by those in the know) that the minimum will be an 'E'. This would make all 'F' and 'G' rated properties unlettable.
"As a practice we have been advising our clients to be aware of this for a while, but I have recently experienced its effect for the first time from one of the main lenders – a bank taking a charge over a development of six modern units that were built prior to the requirements for Energy Performance Certificates on new builds.
They had no legal responsibility for getting the certificates on the units – but it was made a condition of the loan that they were provided.
"This could have very significant implications for landlords, and for occupiers who wish to assign or sublet. Marketability of some properties would become impossible unless they were upgraded to meet the minimum standards.
"It is estimated that approximately 20 per cent of non-domestic properties could be in the F and G rating brackets. Valuations of properties could also be affected if their marketability is diminished, and rent reviews for properties in this situation could also be affected.
"The implications of the legislation are therefore widespread and, given the complexities of both statutory requirements and tenant's leasehold obligations, improving the thermal performance of existing property stock can be fraught with difficulties.
"Whether you're a landlord or a tenant, you would be well advised to seek professional advice firstly from an energy assessor and then a building surveyor to advise on potential works.
"So, food for thought. Perhaps it is time to get your properties assessed so that you can be sure that they have long term marketability."
Simon Dare is an associate director at the property consultancy Innes England.