Tim Darwall-Smith, Director, SBA Property Management

With the government making strides towards achieving net-zero carbon targets, it comes as no surprise that energy efficiency is high up on the agenda for the property industry.

As April approaches, there are fresh changes in legislation that leaseholders and property managers of both residential and commercial properties need to be aware of.

Currently, all domestic and commercial properties for rent need to have an Energy Performance Certificate (EPC) to confirm the building’s energy efficiency. Since 1st April 2020, all properties being let have had to have a rating of Band ‘E’ or above.

So, what exactly is changing now? As of 1st April 2023, owners of residential properties that do not have an EPC rating of ‘A’ to ‘E’ will have to cease letting their property or face fines, unless they have registered a valid exemption. In 2025, this requirement will be upgraded to a rating of ‘C’ or higher for any new lettings, and in 2028, for any continuing tenancies.

It is therefore crucial that managers and leaseholders undertake any required works before 1st April, to avoid facing prosecution. By law, the obligation to comply with this legislation lies with the landlord – not the tenant – and if this isn’t observed then leaseholders are at risk of facing greater losses, such as the potential loss of income of a property if not up to standard.

For commercial landlords, currently a tenancy cannot be granted to new or existing tenants if the property has a rating of ‘F’ or ‘G’ – unless registered on the PRS Exemption Register. Similar to the regulations for residential properties, it will become an offence to continue to let or rent out a property if it has a rating of less than ‘E’ from 1st April 2023.

Landlords who do not comply with the new legislation face sizeable fines of £10,000 to £150,000 per property, based on its rateable value. EPC requirements will continue to tighten in the future, with proposals implying that standards will increase to a ‘C’ rating or above in 2027, then to a minimum of ‘B’ by 2030.

It’s clear that there is no time like the present to review your portfolio; ensure an appropriate EPC rating is obtained and in place, consider what improvements need to be made, or what exemptions may apply.

Various exemptions may be applicable for both residential and commercial properties, depending on reasons of consent and devaluation. Leaseholders with existing tenancies may be granted a short-term exception of six months to comply with the prohibition of letting a sub-standard property so that they have time to assess and complete the works.

Not only is it important for leaseholders to be aware of the changes required to increase energy efficiency now, but of the long-term implications as legislation continues to evolve.

With new regulations coming into force all the time, it can be hard to keep up. The sooner changes can be considered and dealt with, the easier it will become for leaseholders to stay ahead and ensure their properties are energy efficient.

To keep up with the latest legislation, stay tuned for regular updates and advice.