Real Estate Tip of the Week: Energy Act – Part 1: Are you ready? - DAC Beachcroft

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Real Estate Tip of the Week: Energy Act – Part 1: Are you ready?

Published On: 30 August 2016

The Energy Act 2011 is now being debated at a practical rather than academic level: but given the implementation date for the first limb of the restrictions is 1 April 2018, is that debate happening too late?

From 1 April 2018 a landlord is prohibited from granting a new lease if the energy efficiency rating of the property is less than an E. Currently approximately 20% of buildings with an EPC have a rating of an F or G, and so fall below the minimum required threshold of an E.

If you are a landlord you will need to consider the implications of this restriction on your investment. As a tenant, even though you may have been granted a lease before 1 April 2018, if you create an underlease after 1 April 2018, it is you who must comply with the restriction before granting that underlease. This will have timing and cost consequences.

We anticipate that, over time, the position will become more stringent. The minimum rating threshold for compliance can be raised, and if successive Governments continue to keep green issues on their agenda, that is likely to happen. As such, it would be prudent for those positioned to carry out sufficient works to future proof themselves against any upward creep in that threshold.

Those that breach the restrictions in the Energy Act may find themselves being fined up to £150,000; selling the building will not exonerate the outgoing owner from non-compliance as the enforcing authorities can pursue you too! If you breach the restrictions, reputation and profile issues may also be a concern, as your details, that of the building and the fine levied can be placed on an open public register. For those with robust Corporate Social Responsibility programmes, the exercise of naming and shaming your lack of green credentials may ultimately impact on share price and confidence.

Assess your buildings now, plan for any necessary energy efficiency improvement works, mitigate your costs and reduce void levels within your portfolio which non-compliance with this Act might otherwise create. If you need further guidance, why not join one of our workshops designed to assess how these restrictions might affect you. If you are interested in doing that contact Nick Marshall.