How to keep your property marketable, given Energy Act requirements – DTZ
Drew Watkins, associate director in DTZ’s Project and Building Consultancy team in Birmingham, says landlords, investors and occupiers need to act now in order to find out whether properties will meet new standards for energy efficiency.
The Energy Act 2011, due to come into force in April 2018, means that landlords will no longer be able to let commercial or residential property with poor energy efficiency ratings – initially this will be all properties with an EPC rating of below E. “It is worthwhile noting that this date is a long-stop date and the legislation could be enforced sooner,” he warns.
Mr. Watkins advises that the first question to ask should be – why does a property have a poor EPC rating? It could be due to poor-quality lighting, or inefficient heating. The age and construction of a building could also result in poor thermal properties or air leakage.
Secondly – what improvements are required to address the deficiencies identified? For property owners, the initial concerns are expected to be focused on the financing of any such improvements, whereas for an occupier there will be an equal concern about any obligation to pay towards the works, for example through service charge arrangements.
To assist with the costs, the Energy Act includes provisions for the new ‘Green Deal’, a financial mechanism that aims to offset costs against the savings made on the energy bill for the property. This is different from traditional finance agreements in that the repayment remains with the property, not with the owner – and therefore transfers with the property interest, he notes.
The implications of the act are complicated – there is a need to understand where the energy performance issues lie, what is required to address them, and how the mechanism for repayment through the Green Deal will work. “Whatever your interest in property, as with all changes in legislation, a timely and well planned approach adopting the correct professional advice is key to ensuring compliance before embarking on any ‘green crusade’,” he adds.
DTZ recently highlighted that the continued lack of new development in the commercial property market over the next three to five years will lead to an increase in demand for existing property. But if property owners do not comply with the Energy Act legislation in time, their buildings could be ‘obsolete’ until improvements are made.
