Tue 22 Nov 2016
The 2015 Energy Efficiency Regulations, passed in March 2015, set out minimum energy efficiency standards (MEES) for England and Wales. These regulations make it unlawful for landlords to grant a new lease for properties that have an energy performance certificate (EPC) rating below E, from 1 April 2018, unless the property is registered as an exemption.
Careful planning and preparation will be required to mitigate the potential impact, and it is important that buy-to-let landlords and investors take action now if they wish to avoid legal headaches in the near future.
The potential benefits of early engagement in this process are wide-ranging and could have a long-term effect on the way you manage and maximise value from your property investments. For example, this may mean the early disposal of properties at a premium market rate before they become a liability under the MEES legislations.
Alternatively upgrading an existing property’s look and feel can command higher rents or increase tenancy periods whilst also providing long term revenue savings from lower utility costs.
To help you prepare, it is important to establish how best to manage your MEES risk in order to effectively mitigate it, whilst making best use of any OPEX or CAPEX expenditure.
You should aim to audit your portfolio to confirm the buildings and tenancies to which the regulations apply and note exemptions based on building type/lease.
For the remaining non-exempt buildings further analysis should be carried out to determine options, based around a whole life assessment of your properties. These options may include:
Where capital investment cannot be justified you need to establish the most suitable opportunities for the property/site considering the current use of the building/asset plus any more valuable potential uses.
Energy improvement works
You’ll need to target works on areas identified as having scored poorly within the EPC and where expenditure is able to be capitalised. Where capital improvements are carefully specified, these costs can often be offset within the first year through Enhanced Capital Allowances. The works can often lead to a more comfortable environment for users or and enhanced aesthetic appearance.
External funding sources
There are some government sponsored initiatives designed to help with financing energy efficiency measures as loans or grants. Additionally, there may be third party finance options which operate on a ‘pay as you save’ basis which may be worth consideration.
As part of your appraisal,you may care to consider the part that renewables or integrated energy storage solutions could have in reducing the impact of the EPC rating. This may include solar, wind, ground source, natural ventilation and many others.
Ian Shipley, director at WYG, is responsible for leading the company’s energy services to the existing built environment.
Source: Landlord Today