As you may be aware, all landlords who let domestic or commercial properties must have an up to date Energy Performance Certificate (EPC). However what is not such common knowledge is that the laws are now changing as a result of the 2011 Energy Act.

From April 2018, it will be unlawful to let residential or commercial properties with an EPC Rating of F or G meaning that any properties that are graded below ‘E’ will need to have work carried out to improve the energy rating before they can be let out. Therefore here are 8 things you need to know if you are a Landlord or Tenant of a residential or commercial property:

1. The minimum ‘E’ rating will apply to all new residential Assured Shorthold Tenancy agreements, residential long leases and commercial leases from the 1st of April 2018.

2. All existing leases must meet the new standards after the 1st of April 2023 (unless the landlord registers an exemption).

3. Landlords can let a building which is below the minimum standard if any of the exemptions set out below apply. The exemptions are valid for five years only and must be registered. If the Landlord fails to register then this will mean that the exemption is invalid.

• The ‘Golden Rule’: If all improvements possible at no upfront cost to the landlord have been undertaken, and the EPC rating still falls below an E.

• Devaluation: Where an independent surveyor concludes that the necessary improvements that could be made to the property are likely to reduce the market value of the property.

• Third Party Consent: Where the landlord needs to get consent from a third party for example a Local Planning Authority and it has been refused or has been given with conditions with which the landlord cannot reasonably comply.

4. The Regulations will only apply to buildings where there is an EPC already in place. Lettings in place before the introduction of EPCs in 2007 will escape the Regulations. As will buildings which are not required to have an EPC such as industrial sites, workshops, non-residential agricultural buildings with a low energy demand, certain listed buildings, temporary properties, holidays lets, buildings where the EPC is over 10 years old or where there is no EPC, tenancies of less than 6 months (with no right of renewal) and tenancies of over 99 years.

5. Myth Buster (Listed Buildings). There is a mistaken belief that all listed buildings are automatically exempt from the need for an EPC. In fact, the position is far more complicated and is required to be looked at by a ‘building by building’ basis. Under the 2012 EPC Regulations if a listed building exemption is being claimed then the landlord must show that any EPC recommendation report would unacceptably alter the appearance of the building. If it does not then an EPC will be required. If you contemplating the sale, purchase or lease of a listed building then you would be well advised to seek detailed advice on this issue in light of the nature of the building, and its listing category.

6. What are the Penalties for not compliance? Where the breach has occurred for less than 3 months the maximum fine will be £5,000 or 5% of the rateable value of the property. The fine will be doubled after three months and Local Authorities are responsible for enforcing the Regulations.

7. It is not yet clear whether any non-compliant leases (e.g. where the EPC rating is lower than E) will be illegal and therefore unenforceable. This could have implications with bringing tenancies to an end and result in buy to let landlords being in breach of their mortgage conditions.

8. What can we do moving forward? If you are a landlord then you should try to Landlords engage with your tenants and discuss terms for ‘green leases’. This could have the effect that the environmental management and costs, such as energy efficiency improvements and utility bills, are shared for the benefit of both parties.

If you require any further advice or information on EPC’s, or other property matters, then please contact Katie Matthews at Dean Wilson LLP on 01273 249239.