Landlords – Failing To Act Now May Damage Your Asset Value

Landlords – Failing To Act Now May Damage Your Asset Value

  • 17 Nov 0

The deadline for achieving an EPC rated at an ‘E’ or above for privately rented property is April 2018. By this time the EPC must be secured and lodged for landlords to be able to issue a new lease for a property, even to existing tenants. As EPCs measure the fabric of the building, where improvements are required, it is likely that fit out work will need to be undertaken to achieve this. Work must start now to identify, plan, budget for and fit energy efficient equipment that will guarantee compliance by the deadline.

The Energy Efficiency in Buildings Regulations 2015 require landlords to secure an EPC certificate with an E rating or higher in order to issue a new lease for a property from 1st April 2018. Beyond this, there is an additional requirement to secure such an EPC for properties with existing leases by April 2023. With just over two years to go until the legislation takes effect, the pressure to act is on. 

Current estimations suggest that up to 40% the commercial rented property stock will become unlettable by 2018. Property owners must act to protect their asset value as banks and financiers are already refusing loans for the purchase of properties that currently hold EPCs rated at F and G. This is particularly affecting buildings where EPCs were undertaken prior to 2011 when a new grading system was introduced.

Property valuations are also being impacted as the Royal Society of Chartered Surveyors (RICS) requires that energy efficiency and sustainability measures are taken into consideration. Properties most at risk are those built in the 1980s or 1990s with aging air conditioning units and, as is commonly the case, sealed windows. With a lack of natural ventilation, the reliance on grid electricity for heating, cooling and lighting is frequently catastrophic to the outcome of an EPC assessment.  Upgrading inefficient air conditioning with more advanced technologies can immediately lift a G rated EPC to a C.

It is an essential role of property management companies to stay ahead of the game and ensure that any capital investment planned to replace or improve the building fabric is not carried out in isolation but is driven from a robust and targeted plan that is guaranteed to succeed. Those in the managed property sector need to take the lead to secure the financial viability of the buildings within their instruction and to protect the interests of the investors – many of whom will be too far removed from the management of their portfolios to drive the action required.

Carbon2018 has developed its EPC Plus Service to provide an accurate and up to date EPC grade for properties where amendments to software may have led to the rating decreasing. The service involves an in-depth analysis of current position and production of a bespoke action plan that is certain to lift the EPC rating of at risk properties to the required level. The aim is to keep investment to a minimum by targeting the specific improvements that will achieve compliance and meet the needs of prospective tenants.  The service is guaranteed providing recommendations are followed, with an EPC at the desired grade being the end result.

These regulations feed in to the UK’s legally binding target to reduce greenhouse gas emissions by at least 80% below 1990 levels by 2050 however concerns have been raised around whether an EPC is the right model to use to drive energy reduction in buildings. An EPC measures the fabric of a building assessing its capability to perform efficiently. The general consensus was an EPC is not enough as it does not look at actual energy usage. A property might reach an EPC ‘C’ rating, but it wouldn’t reflect the behaviour of the property occupants. This is contrast to Display Energy Certificates (DECs) that are required for large public buildings and are designed to promote the improvement of the energy performance of buildings as they are based upon actual energy usage.

There needs to be some recognition for driving down energy usage and discussions developed around whether a model similar to DECs was a better measuring tool. The lack of focus on actual performance by EPCs means that the tenant’s behavioural changes are not reflected. Both landlords and tenants should be held accountable for the energy use in the building – but current regulation is placing responsibility firmly at the landlord’s door to take action.

To find out more about how we can assist you protect the value of your assets complete the contact form or email compliance@carbon2018.com


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