February 2015
Energy Act 2011 Protecting your assets The Energy Act 2011 contains a number of provisions which will affect owners of property. Probably most significant are the proposed minimum energy standards. The Act, which is set to come into force in April 2018 across England and Wales, is part of the UK Government drive to reach its carbon reduction target of 80% by 2050. The proposed legislative changes will prevent commercial properties being let out which fall below a prescribed level of energy efficiency. The new act will make landlords legally responsible for improving the energy rating on commercial and certain types of residential property to achieve lower carbon emissions. The current proposal is that the threshold should be at an Energy Performance Certificate (EPC) rating ‘E’. Meaning that landlords with buildings with an EPC level F or G will not be able to legally let them without improvement works being undertaken. Landlords need to take a proactive approach to these rules to avoid finding themselves with unlettable property and potential unbudgeted expenditure.
How are Improvements to be funded? The amount of work required to improve the energy efficiency of a building may well be substantial. The Act acknowledges this and with the “Green Deal” sets out a funding mechanism to ensure that any works required to raise the EPC rating to the specified level can be implemented without an upfront cost to the Landlord. This proposed strategy is to provide for the cost of the works to be recoverable through the energy bills for the property. Effectively, the finance is based on a “pay as you save” principle with the cost of the works paid down through instalments generated by the energy savings of the works and collected with the energy bill.
What to do as a Landlord Whilst there is still more than 3 years until the legislation is to be introduced, it is advisable for property owners to commission an EPC of their rented or rentable properties now so as to understand the current rating and appreciate what options there are to increase this. If a rating of E or above is obtained, the owner will be safe from the provisions of the Act until expiring of the EPC which last for 10 years after issue. If a rating of F or G is obtained, recommended improvement measures can be investigated, the feasibility of the Green Deal explored and work can be built into ongoing property maintenance plans in preparation for the introduction of the minimum rating. Jack Lane BSc (Hons) Cert CII Property Development Executive Jack.lane@thomas-carroll.co.uk