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Energy efficiency regulations may render premises 'unlettable'

Commercial properties could become “unlettable” because of new energy efficiency regulations. This is the warning of Ashley Gurr, a Partner at Kerwoods Solicitors LLP specialising in commercial property, who has urged the rental sector to act now. What must landlords do to comply with the new laws?

Why Gurr is so concerned

Speaking to Worcester News, Mr Gurr explained that the Energy Efficiency (Private Rented Property) Regulations 2015 – which will require energy-efficiency improvements to be made in premises with Energy Performance Certificate (EPC) ratings below band E – are “far reaching” and will result in considerable changes for landlords.

“The aim of the new regulations is to improve energy efficiency standards across England and Wales”, Mr Gurr explained. “Exemptions will apply but anyone working in the rental sector needs to get on top of all this now.”

Landlords will be exempt from the requirement to make improvements where such works wouldn’t be cost-effective. Further, Mr Gurr explained, landlords can continue to let, “where the landlord can show that all possible cost-effective improvements have been carried out but the EPC rating is still below an E rating.” Exemptions will also apply where third party consent can’t be secured, a tenant refuses to give consent, or if improvements would devalue the property by 5% or more.

What will landlords have to do?

Landlords renting out properties with low EPC ratings must take steps to improve their energy efficiency – unless an exemption applies. Failure to carry out improvements could result in enforcement action from local authorities, which will have the power to issue fines of up to £150,000.

The new regulations concern all commercial leases lasting between six months and up to 99 years. Unless improvements are made, landlords won’t be able to secure new tenants or renew existing tenancies for properties with EPC ratings of F or G from April 2018.

Commercial property owners who need to make improvements under the new regulations should make sure they're financially stable to cover the costs of the necessary works. Landlords should take action now by securing rental incomes and eliminating commercial rent arrears.

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