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Commercial Property – A Word of Warning

Energy Performance Certificates (EPC) for all commercial properties, when sold or leased, were required from the 1st October 2008. Members should be aware the details are in the Energy Act 2011 and also the energy efficient and sustainable building practices contained within the BREEAM Guidelines (Building Research Establishment Energy Efficient Properties).

Subject to certain exemptions, legislative changes under the Act will make it unlawful to sell or let premises with an EPC rating below a minimum level of E from 2018. This will apply to any property let on a tenancy which is six months or more and less than 99 years in length, and which is legally required to have an EPC. In addition, this legislation will extend to cover existing lettings from 2023 for commercial buildings.

An EPC can be provided via the landlord or the tenant, however it is likely that a standard lease will put the responsibility to obtain the certificate on the landlord.

Since the effective ending of the “Green Deal” some changes may be made, however this matter needs consideration sooner rather than later, particularly if you own an older building within your pension fund.

If your building is rated at below E then it could mean your property valuation is affected which could mean changes to your pension benefits.

Many of the properties held within schemes administered by us, are let to the members’ own company but this will not provide an exemption, since all transactions need to be conducted at an arm’s length basis.

If you are at level E or below it doesn’t mean that your property is unlettable, it means that some remedial actions needs to be taken. This is deemed to be works that are “cost effective”. This is interpreted as capital outlay that should be recouped over the following 7 years by savings in energy cost.

On a building that is not let, clearly this cost will be borne by the landlord but the eventual benefits are likely to be enjoyed by the tenant. It may of course result in the ability to charge a higher rent, which would be of benefit to the landlord. On a building that is let the costs of the remedial actions is likely to fall on the tenant under the terms of the lease.

The regulations will be enforced by Trading Standards Officers and will be up to 20% of the rateable value of the property capped at £150,000.

As already stated it should be noted that certain exemptions apply such as listed buildings, places of worship and others.

If you feel that you may be affected by these rules, we would suggest that you speak with your usual financial adviser or alternatively, speak to Kerry Houghton for more information on 01772 550614 or via email kerry.houghton@taypat.co.uk

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