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“Government proposals to prevent the leasing of inefficient properties in England and Wales will soon force commercial, and residential, property owners to re-furbish and upgrade energy inefficient buildings in order to prevent their stock becoming obsolete.

“From 1 April 2018, any commercial or residential building in the rental market must meet a new minimum EPC Rating of E. This regulation will be introduced under one of three possible options: a soft start where only new leases will need to comply with the minimum EPC rating of ‘E’ by 1st April 2018; a hard start – affecting all leases from the 1st April 2018; or alternatively, a phased introduction meaning a soft start of 1st April 2018 for all new leases with a hard backstop of 2023 for all existing leases – the Government’s preferred option.

“Currently all let properties that have an EPC will be required to meet these regulations. However, the Government has proposed that leases of less than six months or over 99 years will be exempt. In addition, it’s possible that the regulations will include lease extensions and renewals. This would only apply for properties that have an EPC already as the regulations are not empowered to change the regulations governing EPC requirements. Occupiers should also be aware of the regulations as sub-letting and assignments may also fall within scope.

“Enforcement of the regulations will be via local Trading Standards Officers who will determine whether a penalty should be imposed, as well as the value of that penalty. With latest data from the national EPC register indicating that 18% of all commercial stock is EPC rated F or G, and a further 20% rated E, a large proportion of commercial buildings stand to be impacted by this law change.

“We fully expect that the Government will continue its focus on energy efficiency in commercial buildings with even more stringent requirements being introduced further down the line. This is why, at St. Modwen, we strive to design and build commercial space to an enhanced environmental standard in order to ensure that it is future-proofed to comply with any further future Government policy requirements. Our 6,000 sq ft of office space at Locking Parklands in Weston Super Mare is a great example of this future-proofing in action. The offices deliver BREEAM Excellence Standard and an EPC A rating. They are fitted with state of the art energy saving technologies such as photovoltaic panels on the roof and daylight sensing lighting to reduce running costs and optimise energy performance compared to standard buildings.

“Ahead of 2018, existing property owners should be looking to carry out a full risk assessment across their rental portfolio; ensuring that all stock is adequately EPC Assessed and making provision to retrofit any underperforming buildings with energy efficient measures, in line with the building’s natural lifecycle.

“Landlords will be forced to invest now in adequate energy efficient measures in order to enhance EPC ratings of their properties. The value of non-compliant or poorly performing buildings will be greatly reduced if they cannot be occupied after 1 April 2018. Many energy inefficient buildings may have several tenants on leases and will therefore require that new leases are entered into on at least part of their rental property. The most commonly required energy efficient upgrades are likely to be building-related such as new boilers and cavity wall insulation. Landlords will need to instruct EPC Assessments for their building stock now in order to gauge the level of investment needed to improve EPC ratings and ultimately protect the value of their properties. They will also need to engage with any leasehold tenants in plenty of time to advise of any need to vacate an inefficient rented commercial building while the necessary energy efficiency upgrades are carried out. Likewise, leasehold tenants will need to start looking forward now to ensure the best alternative premise options while upgrades are made to unsustainable existing premises ahead of the 1 April 2018 deadline.Occupiers of energy inefficient buildings could face disruption, an increase in costs for the building, or be required to move out possibly at short notice in situations where many other occupiers in a similar situation are also looking for alternative space. Forward thinking businesses need to consider their options sooner rather than later to minimise their business disruption and costs “

Ian Guy is Senior Development Manager at leading UK regeneration specialist, St. Modwen. The company operates across the full spectrum of the property industry. In the South West, St. Modwen’s property portfolio comprises 14 development regeneration projects, spanning 580 acres of net developable land across Gloucestershire, Somerset, Wiltshire, Avon and Devon. Collectively, Major projects in the region include the £270 million regeneration of Firepool in Taunton, the £400 million Locking Parklands development in Weston-super-Mare, the £210 million Skypark development in Exeter, the £150 million Littlecombe scheme in Dursley and the £150 million Access 18 scheme in Avonmouth. Collectively these will deliver over 8 million sq ft of commercial accommodation and create circa 2,940 homes.