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The good news is that upfront costs associated with energy efficiency improvements should also be lowered as a result of available subsidies (e.g. ECO) and local authority grants





Minimum Energy Performance Standards Brought in to force in March 2015, the MEPS make it unlawful for landlords to grant a new lease on properties that have an Energy Performance Certificate (EPC) rating below E from the 1st April 2018. EPCs are a mandatory certificate which rate a building’s energy efficiency on a sliding scale from A (most efficient) to G (least efficient) and are required when a building is either sold, rented or constructed. The certificate is valid for 10 years and contains information about a property’s energy use and typical energy costs, as well as recommendations on how to reduce energy use.


The regulations apply to both domestic and non-domestic properties, with some exceptions, and do not affect sales. Data from the national EPC register indicates that 18% of commercial property stock has an EPC rating of either F or G and another 20% are rated E. This suggests that around one in five such buildings fall within the lowest energy efficiency bands. The regulations also become progressively stricter into the 2020s. A ’regulatory backstop’ has been included, which would apply after 1st April 2020 (for the domestic PRS) or 1st April 2023 (for the non-domestic PRS), by which point all landlords owning ‘F’ and ‘G’ EPC rated properties (including those where the sitting tenant has not moved out since 1st April 2018) must attempt to meet the minimum EPC requirement. In Scotland, the government is currently finalising the form of


regulations for


Section 63 of the Climate Change (Scotland) Act that may require eligible non-domestic buildings to go beyond the above (including by affecting sales). Properties with a conditioned floor area greater than 1,000m2


will be subject to an ‘Action on Carbon and Energy Performance’ (ACEP) which would consist of an EPC, Recommendation Report and Action Plan. The latter will detail timescales for implementing recommended energy efficiency improvements. Thereafter owners would either carry out physical improvement work to the building within the specified timescale (currently 42 months) or make arrangements to measure, report and display Operational Ratings within 18 months. Should the owner cease to undertake Operational Ratings, they will be obliged to implement the recommended energy efficiency works.


Risks and opportunities


Useful research into the impact of these regulations on commercial portfolios is already being conducted. A recent study commissioned by the Green Construction Board showed that compliance will be affordable for most property types and, in many circumstances, the existing value of F and G rated buildings will largely be unaffected. This is because in many locations the costs associated with compliance will be small relative to the property’s rental and capital values. The good news is that upfront costs associated with energy efficiency improvements should also be lowered as a result of available subsidies (e.g. ECO) and local authority grants. Valid exemptions from carrying out energy efficiency works are also applicable if they do not meet


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