Landlords – the energy efficiency clock is ticking

From 1 April 2018, landlords could find themselves unable to rent commercial property if it falls below the Government’s new minimum energy efficiency standards. Two years might seem a long way off, but if landlords are to avoid incurring possible fines of up to £150,000 for non-compliant buildings, the time to act is now, warns James Porter, Sales Director at Remeha Commercial.

In March 2015, the Energy Efficiency (Private Rented Sector) (England and Wales) Regulations passed into law, potentially one of the most significant pieces of legislation aimed at improving the energy efficiency of our buildings in recent years. These regulations, better known as the minimum energy efficiency standards (MEES), make it unlawful under the Energy Act 2011 to let properties with an Energy Performance Certificate (EPC) rating of F and G from 1 April 2018.

EPCs provide an energy rating for a building based on the performance potential of the building fabric and its services (heating, lighting and ventilation) which is rated from A, the highest, down to G. The minimum energy efficiency standard will be set at an E EPC rating and will apply to all new leases as well as lease renewals from 1 April 2018. From 1 April 2023, the regulations will apply to all eligible privately rented property, including existing tenancies where a lease is already in place and a property is occupied by a tenant. Owners of non-compliant buildings can be liable for fines of up to £150,000.

Today, 66% of commercial property by value is rented, according to the BPF & IPD Annual Data report. All non-domestic property requiring an EPC, in accordance with the Energy Performance of Buildings Regulations 2007 or the Building Regulations 2010, is in scope of the new regulations. Properties that are exempt include buildings let on a tenancy for a term of six months of less (as long as granting of the tenancy does not mean the tenant will have occupied the property for more than 12 months) and those let on a tenancy for 99 years or more.

So what impact will this have on landlords? A considerable one, according to data from the national EPC register which indicates that 18% of commercial stock currently falls short of minimum energy efficiency standards with F and G ratings, while a further 17% of properties are rated E by today’s standards.

With such a considerable number of commercial rented buildings potentially non-compliant in 2018, now is the time for landlords to identify where upgrades are necessary to ensure that the work is completed before the new legislation comes into effect. MEES regulations are not draconian – in fact they offer safeguards to ensure that they require only permissible, appropriate and cost-effective energy efficiency improvements.

As the largest single end user of energy in a building, heating offers huge scope for improved efficiency. This is highlighted in a study by Sweett Group for the Investment Property Forum (IPF) and a review by the Green Construction Board, both of which identified condensing boilers and controls as ‘quick win’ solutions to improving a building’s EPC rating.

The first key benefit for landlords from retrofitting condensing boilers is the reduced energy waste. Condensing boilers can achieve efficiencies of around 98% GCV when operating in a well-designed system with a weather compensated control. By replacing a 15-year-old non-condensing boiler that is operating at just 50% efficiency with a high-efficiency condensing boiler, landlords can lift their F or G rated building to a D, simultaneously cutting the running costs by up to half and lowering the carbon footprint.

Secondly, as condensing boilers are easy to install, there is minimal to zero disruption. This is particularly relevant to landlords who are often required by terms in leases to compensate any tenants subjected to disruption. Condensing boilers offer landlords greater flexibility as they can either be retrofitted during a general refurbishment when the building is vacant or as a ‘one off’ improvement when a building is wholly or partly occupied. Where a lease may be about to expire but the full planned refurbishment of the property is some years away, a simple boiler upgrade may prevent the building from falling into disuse.

Financially, condensing boilers are a cost-effective efficiency measure, delivering significant, immediate energy and carbon savings while at the same time creating a more comfortable environment through more reliable heating. The rapid return on investment adds to their appeal, making them a replicable solution for landlords with a large portfolio of properties.

Finally, condensing boilers are extremely versatile, equally effective operating as the sole provider of reliable heat or working in conjunction with Combined Heat and Power units within a heat network to help meet peak demand for energy-efficient, low-carbon heating.

2018 might seem a long way off, but the clock is ticking for landlords to address the energy efficiency of their buildings. Commercial buildings are responsible for 18% of the UK’s total carbon emissions, according to the Carbon Trust, a figure that has remained static for the last 20 years. By addressing the energy performance of our buildings, the MEES regulations could, at last, make rapid progress in carbon reduction a real prospect. As occupiers increasingly favour higher EPC-rated buildings with their lower running costs and companies with proven sustainable credentials, business-savvy landlords will move quickly to identify efficiency measures. In condensing boilers, landlords have an affordable, efficient, reliable and easy-to-install solution to improved building performance and increased energy efficiency. At Remeha Commercial, we look forward to supporting landlords as they upgrade to high efficiency heating ahead of the deadline. After all, legislation aside, why waste energy when you could save?

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