Why new energy laws may slash the value of your property

Many homeowners and landlords are unaware that new laws designed to make homes and commercial premises more energy efficient could have a negative impact on the value of their properties, Rob Howells, a specialist in property at Swansea-based law firm Hutchinson Thomas, has warned.

The ‘Energy Efficiency Regulations 2015’ started to come in effect in April 2018 and will be implemented in stages until April 2023. They are designed to reduce the amount of energy used by new homes and business premises.

They stipulate that all new domestic and non-domestic (commercial) lettings and lease-renewals must comply with a minimum Energy Performance Certificate (EPC) of ‘E’. If the rating is below this, it may negatively affect the value of that property and/or the rent it can command.

Although the April 2018 statute has already been passed, all new private residential developments must comply by April 2020. With regards to commercial property from 1 April, landlords will not be able to grant new tenancies or renew existing tenancies unless the building has less than the minimum rating of E and from 1 April 2023 landlords must not continue to let any properties that have a rating below E unless an exemption has been registered.

Failure to comply within three months of a development being completed could result in a fine equivalent to 10% of the rateable value of the commercial property, with a minimum of £5,000 up to £50,000; after three months, this increases to 20%, or a minimum of £10,000 and a maximum of £150,000.

The practical result of these changes is a possible reduction in value for properties with a poor energy rating. The changes could also undoubtedly have an adverse effect for landlord’s on rent reviews of existing leases.

To discover whether your property is under this minimum energy efficiency threshold, click this link, to search your property’s postcode and see if it already has an EPC. If you don’t have one, you can apply for one via the official channel here. Alternatively, there are other unofficial channels you can search for online.

If your EPC is below the magic ‘E’ threshold, you may wish to increase your energy efficiency. Many older properties will fall short; it is estimated that around 300,000 properties are currently sitting at an ‘F’ or ‘G’ rating.

Rob Howells offers several tips to help improve energy consumption.

“There are numerous guides online that will help you save energy in a domestic property. However, advice on how to reduce your energy usage in a commercial property is much harder to find,” he says.

“I would advise that you immediately look into how much energy your heating, ventilation, lighting and air conditioning systems are taking up – as these take up roughly three quarters of a buildings energy use. Businesses are also increasingly implementing the help of building management systems to analyse and adjust their energy usage, based on external factors and how many people are present inside the building. It is possible for Landlord’s to improve their energy rating by carrying out minor changes such as using energy efficient lightbulbs and preventing the use of portable heaters.”

For expert legal advice about commercial property law – contact Rob on 01639 645061 or email: rob.howells@hutchinsonthomas.com