UK: Do You Have The Energy For 2018?

Last Updated: 15 November 2016
Article by Simeon Fenn

4.1°C. That was, according to the Met Office, on average how much warmer last December was compared with the 1981-2010 long term average, making it the warmest December since 1910.

Such unusual weather is often cited as an example of climate change, which is now largely (if not universally) accepted as a significant challenge for us all. Which is why in 1997 the UK, along with the majority of developed nations, became a party to the Kyoto Protocol, an international agreement committing signatories to certain reductions in carbon emissions.

The political and legal wheels have turned slowly since then, but much like the capricious weather, those of us with an interest in commercial property could not miss the increasing burden of energy related regulations. In 2008 it was Energy Performance Certificates (EPCs). In 2010 came the Carbon Reduction Commitment. Eyes will now be turning to the latest regulations, imposing minimum energy efficiency standards (MEES). If you are not presently aware of MEES, I hope that this short article will bring you up to speed. If you are aware of MEES, but are not yet taking any action, I hope to persuade you to now do so.

In truth, the introduction of EPCs was not so bad. Landlords are simply required, before letting to a new tenant, to secure a relatively inexpensive assessment which rates their property in terms of energy efficiency, on a scale from A to G, with A being the most efficient. Although the certificates come with advice on steps which could be taken to improve energy efficiency, there is no requirement to carry them out. The certificates last for up to 10 years, so in many cases landlords will have secured them and not had to address the issue again.

The introduction of EPCs however, was really only the government's first step in a longer term plan. The second step, is to encourage energy efficiency to be improved (and hence emissions reduced), by making it unlawful for landlords to let properties with ratings towards the bottom of the scale. We now know that it is those properties with an EPC rating of F or G which will be subject to that restriction (around 18% of all current properties). But it's not quite that simple, and the goal posts may well move in the future.

As matters stand, the property industry will shortly be faced with a so-called 'soft start' to the new order. Specifically, by 1 April 2018, it will be unlawful, save in certain excepted cases, to grant a new lease of a property with an EPC rating below level E. Two important points follow from this.

First, if your property does not need an EPC (for example, if you have had the same tenant since before 6 April 2008), you will not be affected until you need an EPC. Second, the change only applies to new lettings. So a tenancy within a fixed term, or even during a holding over period, will not immediately be caught (though they would on renewal). Fast forward another 5 years, to 1 April 2023, and the limitation will apply to all tenancies (this phasing in being the so-called 'soft start'). It also seems likely (but not yet confirmed) that in time the minimum energy rating will be increased, so that property efficiency is gradually improved. But that's getting ahead of ourselves. Let us for now concentrate on the more imminent change.

Property owners should now be identifying properties in their portfolio with a low EPC rating. Those with an F or G rating will clearly require thought as to the measures which could be taken to improve energy efficiency before 2018. However, those with an E rating should also be considered. Why? Because for many properties the EPC will be due to expire not long after the new regulations come into force, and it cannot be assumed that a current E rating will remain when the property is re-assessed. Changes in buildings regulations, amongst other matters, could well see the property's rating drop.

Having carried out this initial review, owners can then consider works which could be effected and whether, despite the EPC rating, an exemption might apply. The main ones will in practice be that:

  • The improvements are not cost effective (meaning in most cases that they will not pay for themselves through a reduction in energy bills within seven years);
  • Despite making reasonable efforts, the landlord cannot get consent (e.g. from tenants, lenders or superior landlords) to carry out the works;
  • Expert advice shows that the works will reduce the property's value by at least 5%, or wall insulation required will damage the property.

To take advantage of an exemption, you must register it on the central PRS Exemptions Register. The exemption will then last for 5 years.

If an exemption does not apply, landlords will need to consider when works will be carried out. Ideally they will be scheduled during void periods. There will inevitably be a lead in period, and so careful management of any upcoming tenant exits will be required. There is also a potential impact on dilapidations claims which will need to be considered too.

What happens if you do not comply with the regulations? Will the tenancy be void, or the tenant forced to vacate? Despite concerns that might be the case, the regulations do not have that effect. However, there are penalties. Fines can be imposed up to a maximum of £150,000. There are also 'naming and shaming' provisions, with the relevant breaches and amount of any fines levied being recorded on the PRS Exemptions Register.

Whilst 2018 may still seem some way away, there is potentially much to be done to comply with the MEES regulations before then. Portfolio reviews, assessment of improvements works and their effects, seeking consent for works, securing valuation advice, applying for exemptions, managing tenant renewals/exits, scheduling works and considering dilapidations will all take time. Suddenly 2 years is not sounding such a long time after all, and landlords would be well advised therefore, to be looking at the issue now.

UPDATE (APRIL 2016): The PRS Exemptions Register was due to be available for registrations from 1 October 2016. Under draft Regulations before Parliament however, this is proposed to be delayed until 1 April 2017 to allow "additional time to design and fully user test the Register, ensuring an optimal customer experience."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions