Andy Slaney investigates how a legislative change on the letting of commercial properties could be a criminal offence by April 2018
According to this week’s Estate Gazette some 200,000 commercial properties in England and Wales have an Energy Performance Rating of F or G. These are typically older properties and have the poorest performance in terms of CO2 production (kg) per m² of floor space. If you are a landlord of such property OR rent space within such a property please read on as from April 2018 it will be illegal to let such property.
What effect will this have on rates, rents and investors?
There are potential implications for the HMRC in relation to rating hypothesis and associated rateable values. It is unclear what the main effect on these will be but it could possible see a significant fall in value or possible no value at all.
For landlords this could become a big liability if your property has a EPC of F or G as investment will be required to improve this. However the costs of improving energy consumption could be recovered through the buildings service charge.
Unfortunately tenants could then bear the brunt of this initiative if landlords do decide to recover the costs of energy improvements within a building service charge. Serious consideration will need to be given to what this means both at rent review and on surrender and or grant of a new lease.
On a more positive note investors could use this latest change to negotiate purchase price of old building stock downward.
How much will all of this cost?
The Estates Gazette article estimates the potential liability for upgrading buildings with an EPC rating of F or G to be in the order of £29bn. They go on to estimate annual savings in terms of environmental performance of £3.9bn.
If true it will take on average 7.4 years to see a return on investment.
What the future holds..
Just how this will be enforced is difficult for me to see. The government will be issuing a consultation paper in the coming months. Without rigorous enforcement I suspect that it will take some time for this legislation to have a real impact.
One thing is for sure though. A comprehensive estates strategy will help you evaluate the risk and plan for the future. My advice for your risk register;
Probability = High
Impact = High
If you are interested on how this legislative change may effect you then please complete our short survey.https://www.surveymonkey.com/s/9LJPVYM
The results of which will be published in a forthcoming blog via Provelio's website.
by Andy Slaney
Director at Provelio
| 13/05/2014 11:16 |comments powered by Disqus