From April 2018 it will become unlawful to let residential or commercial property below a minimum level of energy efficiency. This will have a significant impact for landlords and investors, particularly those with secondary properties.
The government has indicated that the lowest acceptable rating is likely to be an EPC Band E and that landlords with inefficient stock rated at Band F or G will not be able to lease these properties after April 2018.
It is estimated that nationally approximately one fifth of properties potentially fall in to the at risk group.
There is still much uncertainty regarding the detail of the legislation, which transactions will be covered and what the exceptions will be. The legislation could potentially include properties that are already let, although it is anticipated it will just apply to new lettings initially. Regardless of the uncertainty that remains, one thing is for certain – now is the time to take action.
There are some positives owners of energy inefficient properties can take from the current position. Firstly, there are still almost 4 years to take action. Secondly, there are a number of options available to fund energy improvements, potentially at no cost to landlords.
James & Sons have undertaken a review of our managed portfolio to establish an Energy Act Action Plan. Where an EPC is already available the results have been analyzed to identify the ‘at risk’ properties (current Band F and G) and those potentially at risk (current Band E). The Band E’s are potentially at risk as over time they will gradually slide down the energy efficiency bands if no action is taken.
Having analyzed the data, an action plan can be produced for each ‘at risk’ property to identify the most cost effective improvements to enhance the energy efficiency. If there is no EPC available, now is the time to consider obtaining one.
It is also important to carefully consider the funding options available for improvements. These do change on a regular basis, but there are currently a number of options for residential property. Funding for commercial property is currently more limited, but this will inevitably develop over the next few years.
CONCLUSION – Take action now.
The full detail of The Energy Act 2011 remains to be clarified, but one certainty is that this is not going to go away. As April 2018 nears, there is likely to be an increasing effect on the value of properties with poor energy assessments. We anticipate a two-tier market developing and an increasing gap between energy efficient properties and those with poor energy performance. To minimise the risk to your properties take action now.