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 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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.