The Energy Efficiency in Buildings Regulations 2015 makes it unlawful to issue a lease to a new or existing tenant unless there is an Energy Performance Certificate (EPC) in place with a rating of E or above from 1st April 2018. Beyond this, there is an additional requirement to secure such an EPC for properties with existing leases by 1st April 2023. With the deadline looming, the pressure on landlords to protect investment yield is very real.
Banks and financiers have been refusing loans for purchase of properties that currently hold EPCs rated at F and G for some time now. Some lenders are going further and requiring existing EPCs are repeated prior to loan approval regardless of the current rating and despite certificates still being valid. This is particularly the case where EPCs were undertaken prior to 2011 when a new grading system was introduced. Property values are also being impacted as the Royal Society of Chartered Surveyors (RICS) requires that energy efficiency and sustainability measures are taken into consideration when valuations are calculated. RICS has also advised that a surveyor can refuse to carry out a valuation where there is no current EPC in place.
In addition to the financial pressure, tenants are also demanding more is done. Many multi-national companies are requiring radical improvements from landlords in order to lease buildings with one major household brand insisting on an EPC rating of C or above before it will take a lease on any premises. Planning is critical to future success and the essential starting point is to consult the current EPC position before planning or investing in any improvements. In order to prepare businesses need to undertake an in-depth analysis of current position and produce an 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 required grade being the end result.
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.
With estimations that up to 40% the commercial rented property stock will become unlettable by 2018, landlords must act now or face significant devaluation of building. It is therefore vital that those in the managed property sector acts now 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.
EPCs use a piece of software to model the building and where certain information is not available, default values can be used. Before undertaking any upgrade works requiring capital investment, ensure that the EPC is as accurate as it can be. In several instances, replacing defaults with actual data can help push the score up a few points and where EPCs are at the top end of a band, could be the difference between a compliant or non-compliant grade. Spending time working with your EPC Assessor to ensure the information required is available can save expense further down the line as for every point you improve the score, the lesser the extent of capital upgrade works required. Some of the common areas where we have been able to make significant improvements by ensuring the most accurate information is used are air permeability, lighting, upgrade works and U-values.
It seems that today there is an art to the production of Energy Performance Certificates (EPCs) to ensure that companies attain the best possible score. Gone are the days of just ticking the compliance box in order to secure a sale or letting. The introduction of the Minimum Energy Efficiency Standards (MEES) means that today’s EPC is all about quality and strategy to maximise the rating and protect asset value.