Green deal or no deal Now might be the time to read your EPC and act Who will this affect?
1st April 2018 might seem a long way away but commercial property owners, tenants and lenders should be considering their options now, in view of the provisions of the Energy Act 2011 (the Act). The Act makes provision for the arrangement and financing of energy efficiency, improvements to be made to properties by owners and occupiers in particular in the private rented sector. Initial indications are that between 18 and 20% of current commercial properties will need to be improved in order to meet the Minimum Energy Performance Standard Regulations (the Regulations), which as yet still do not exist. The energy rating of a building is determined by its Energy Performance Certificate (EPC) and the vast majority of commercial buildings are required to have an EPC before they can be sold or let. Current assessments are that the threshold for compliance with the Regulations are that a building should have an E rating and, therefore, those buildings with F or G ratings will not be able to be let after the Regulations are in force, which is no later than 1st April 2018. This is unless significant efforts (i.e. the full package under the Green Deal has been implemented) have been made to reduce the rating to the lowest possible level.
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The Green Deal provides a funding mechanism to ensure that any works required to raise the EPC rating of a building can be implemented without an upfront cost to the landlord/ owner but the cost of the works and finance will be recoverable through the energy bills for the property from the party that instigates the works. However, the savings from the improved services must be sufficient to cover the finance and capital costs.
Who is responsible for the works?
Owner occupiers are going to be responsible for improving the energy efficiency of their buildings. If the building is let, a landlord of a non-domestic property will be required to take such action to ensure a level of energy efficiency is provided in order to meet the Regulations. The property may not be let until the landlord has complied with the obligations mentioned in Section 49 (2) of the Act, thereby making such improvements in compliance with the Regulations. In some and perhaps only limited instances (it will depend upon the wording of the service charge provisions in the lease) will the costs of these works be payable by a tenant. A tenant would only normally be liable for the cost of repairs and not improvements and, therefore, improvements may not be recoverable as part of the service charges. However it is not uncommon for service charge
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‘Owner occupiers are going to be responsible for improving the energy efficiency of their buildings.’
david ashton Head of commercial property at rix & Kay Rix & Kay is a leading regional law firm with offices in Brighton & Hove, Seaford, Sevenoaks and Uckfield. The firm has grown significantly over the last decade which bears testament to the strength of our client relationships and progressive attitude. Recognised in the latest editions of The Legal 500 and Chambers and Partners in thirteen and eight practice areas respectively, the firm also boasts eleven Leaders in their Field. We serve individuals, organisations and businesses across the South East and further afield.
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