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The South West Specialists

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April 2018 – Major Shakeup!

From April 2018 the Government proposes that it will be unlawful to let Commercial (Non-Domestic properties) with an Energy Performance Certificate (EPC) rating lower than an ‘E’.

As long as there is no ‘upfront’ cost to them, it is widely anticipated that Landlords of premises rated F & G will be expected to explore all improvements that will improve the EPC rating to an E or above.  The most likely way that Landlords will be able to make improvements is via a Green Deal finance arrangement.  It is also intended that Head-Tenants will have similar duties as a Landlord, if they assign or sub-let the premises.

The implementation of this proposal moved a step closer when a consultation, conducted by the Department of Energy & Climate Change, on the Minimum Energy Efficiency Standard Regulations for Non-Domestic properties in England and Wales closed on the 2nd September.  The results are currently pending.

In addition to the above it has been proposed that, from 1st April 2023, all tenanted Commercial properties will be subject to the new requirements, unless they can demonstrate an exemption.  It is intended that exemptions will be applicable where:- • There is an ‘upfront’ cost in implementing any improvements; • If third party consent to any improvements is required, but not granted; • If an independent valuation demonstrates that the improvements would result in a material reduction to the value of the property.

The consultation paper also asked parties to consider whether these changes should be applied to very short leases i.e. six months or less and very long leases of more than 99 years.  To prevent parties being creative, it is likely that two consecutive leases of six months will trigger the requirements for the Regulations.

The implications of this Legislation will be far reaching for both Landlords and Tenants and we anticipate that in the early stages, disputes will arise between parties regarding who will be responsible for any upgrade works.

It is very important to note that Valuations, Rent Reviews and Lease Renewals will also be affected as parties consider the effect of this major shakeup on the rent and the ability to let the premises.

In regards to enforcement, it has been proposed that Trading Standards will be able to apply a Civil Penalty, which is likely to be linked to the property’s Rateable Value.

As April 2018 approaches, Vickery Holman is monitoring the proposed legislation carefully.  With the Regulations due to be formalised during 2015, we strongly recommend both Landlords and Tenants keep in close contact so that they can be kept well informed as to how the proposed changes will affect them.

For more information please contact Nick Corker on 01872 245524 or email ncorker@vickeryholman.com