Energy performance certificate changes could cause problems for tenants in commercial buildings27th February 2013

Jones Lang LaSalle has warned that a good number of businesses may face fines for not taking heed of the new Energy Performance Certificate (EPC) rules governing commercial buildings, which came into effect in January and are now the responsibility of the tenant and not the landlord.

Rachel Andrew, director in Jones Lang LaSalle’s Property and Asset Management Department in the Birmingham office, said: “The government’s changes to EPCs are very important to the property industry especially as they place new requirements on occupiers of certain commercial buildings over 500 sq m that may previously have been exempt and are frequently visited by the public including retail and leisure.

“It is the tenant, not the landlord’s responsibility to ensure this happens for their occupied space and this change to the law and lack of awareness could mean businesses such as shops, bars and restaurants get caught out. Landlords may however face similar obligations for a building’s common areas under their control. Ultimately, businesses could be fined for non-compliance.”

Jones Lang LaSalle highlighted that there are further sustainability changes in the pipeline from the government. As of 2018, it will be unlawful to let a building with an EPC below a minimum standard – currently expected to be an ‘E’. According to Jones Lang LaSalle, regulation is expected to only become tighter with time and property investors will need to pay increasing attention to the overall sustainability profile of any building.

Rachel Andrew added: “Newly built property should remain insulated from these changes for the time being. For a swathe of existing stock, the location and demand profile may justify the required investment to improve a property’s rating but in other locations, where demand is already looking vulnerable, the problems are more difficult to solve.

“Capital values could fall on inefficient buildings as we near 2018 and clearly, it will be difficult to raise finance for capital expenditure on assets for which future income growth is uncertain.”

According to Jones Lang LaSalle a change of use of existing inefficient premises to other uses might be a feasible solution, but only for property in the right location and of the right type; it is not a panacea. Moreover, alternative uses will also be subject to sustainability criteria.

Rachel Andrew said ‘We are already working with our clients to develop a strategy to deal with poorly rated properties in their portfolios so investment and changes can be planned for rather than leaving action to the last minute. We strongly advise all commercial property owners and occupiers to review their portfolios now and consider the risks and opportunities for their assets. First and foremost, it is essential to know the current EPC rating of your building. You can then consider options to improve the energy rating, spread any costs and minimise future problems.”