Beware the power of the Energy Act!

If you are the landlord of a commercial property which you let out, the Energy Act 2011 may affect you. In an effort to increase the energy efficiency of buildings the government is to introduce new regulations whilst at the same time providing some financial assistance. Peter Conroy, partner at Trevor Dawson Chartered Surveyors, runs through the key points.

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Private rented sector regulations

Once these regulations are in force, no later than 1st April 2018, buildings will have to reach a minimum energy efficiency rating before they can be rented. It is probable that this will be identified by reference to the building’s Energy Performance Certificate, which all commercial buildings are now required to have when they are sold or let.

The indications are that the threshold will be an E rating, thus landlords with buildings that have F or G ratings will not be able to let them from 1st April 2018 unless they have made sufficient efforts to reduce the rating to the lowest possible level.

The green deal 

By way of encouragement to landlords and building owners to improve the efficiency of their buildings, the government has introduced The Green Deal which provides a funding mechanism to enable works required to raise the Energy Performance rating of a building to be implemented without upfront cost to the landlord.

This is achieved by providing for the cost of the works plus finance charges to be recoverable through the energy bills for the property. However, it will be the party that pays the energy bills rather than the instigator of the works that gains this benefit. Landlords will have to bear this in mind when setting rents, and ensure that tenants are aware of this benefit to them. Whilst, clearly, there are going to be developments before the regulations come into force, anyone acquiring a building to let out at the present time should be aware that a building may need to be upgraded and landlords with properties with poor Energy Performance Certificate ratings should be looking at ways in which their buildings can be improved.