Landlords who are not geared up for next spring’s (April 2018) regulatory changes, which make it unlawful to bring to market properties for rent or lease renewal not achieving a rating of E or above, are being urged to act now to prepare - but they should not panic unnecessarily about the cost of upgrading to meet the compliance threshold.

That’s the advice from commercial property agency Barker Storey Matthews who has issued its ‘be prepared’ message before this year’s end in marking the tenth anniversary of the introduction of Energy Performance Certificates (EPCs) in 2007.

Wrapped up in the international Kyoto Protocols of the early 1990s and ongoing national policy initiatives on climate change, the focus on the energy efficiency of buildings came into sharp relief with energy assessments and resulting certification becoming mandatory at the point of sale or letting from 2007.

Institutional landlords have factored in the 01 April 2018 changes to EPC bands for commercial – and residential - property lettings for some time now and it is the smaller landlords and investor purchasers to whom Barker Storey Matthews is addressing its seasonal reminder.

While there is no statutory prohibition on selling properties performing below Band E from April next year (2018), there will be an impact on the value of investments dependent on the extent of works required to make the property compliant.

Lenders are already prepared for the forthcoming changes. They will not want to be lending on property investments to let unless energy performance has been investigated and any works required scoped out by the applicant to meet the Band E threshold.

There is a view that lending might tighten on poor energy performing properties. 

Barker Storey Matthews advises that while vendors want to pass the obligation to purchasers, banks and those professionals advising buyers are likely to insist that vendors bring their properties up to standard prior to any purchase completing. Alternatively, lenders and advisers may seek to factor costs into the agreed purchase price.

The property agency believes it is important that the minutiae of achieving energy performance compliance are put into context. Costs to improve properties to ensure compliance may not be prohibitive. 

In referencing a recent enquiry of its building surveying professionals, Barker Storey Matthews reports that the cost of upgrading a number of industrial units of between 900 sq ft to 1,000 sq ft each to achieve Band E status - from the starting points of Bands F and G - was only £3,000 in total.

Based on the experience of Barker Storey Matthews’ four agency offices in the eastern region, a decade of compulsory energy performance certification has had little effect on the market to date. 

However, it admits that next year’s statutory changes have yet to play out in the matter of new instructions, lease renewals or the granting of new tenancies where the lease terms are more than six months but less than 99 years – all of which the 01 April 2018 changes encompass.

Steve Hawkins, Managing Director, explains, “When potential occupiers look at a building – to lease or to buy – they know that if it’s an older building the systems are likely to be older and less efficient, with the opposite for a newer building which is more cost effective to run.

In specific property sectors which are very tight and available stock limited, such as small industrial units to let in Peterborough or Huntingdon or the office market in Cambridge or the more mid-sized industrial units in Bury St Edmunds, energy performance is just one of the criteria occupiers take into account.

Obviously, the fact that it will not be lawful to lease properties certified F or G after initial energy performance assessment pre-instruction will heighten potential occupiers’ awareness. 

This might lead to a delay in properties coming to the market or the completion of lease agreements while improvement works are carried out.

A Band F or G property now is not an insurmountable instruction after 01 April 2018, but any avoidable delay in marketing is not in the interest of either party in the transaction.

Hence our 2017 year-end timely reminder to landlords and investor purchasers.”