27 May Significant new Government consultations on energy efficiency
The Government has issued two significant consultations on energy efficiency says commercial property agent Prop-Search, that are relevant to building owners, tenants, landlords, real estate investors, asset management/consultancies – from both large and small organisations.
The first consultation seeks views on the Government’s proposals to introduce a national performance-based policy framework for rating the energy and carbon performance of large commercial and industrial buildings above 1,000 sq m. This will include annual ratings and mandatory disclosure; to ensure that large businesses and building owners will be aware of, and accountable for, how effectively they use energy. The rating will reward a building with a higher score if the building actually reduces its measured energy use and carbon emissions.
Samantha Jones, an Associate Director of Prop-Search, said: “The proposal is that the energy use and carbon emissions from a building will be benchmarked against similar building types, which will then produce a simple rating, for example between 1-6 stars, where 6 stars could represent the best and 1 the worst. The consultation describes the process, in 1-6 stages, to go from a set of meter readings to the rating. It is proposed there will be two possible rating types – “base building rating” for building owners with tenant space and “whole building rating” for owner occupier/single tenant sites.”
The Government plans to introduce the rating in three phases throughout the 2020s. The proposal is for a phase one soft launch in April 2022, which will require all appropriate sites to register and produce a rating within the first 12 months. Disclosure of the rating in the first year will be voluntary but highly encouraged. The Government propose to legislate to enable mandatory disclosure from the second year of being on the rating framework. Phases two and three of the rating’s introduction will address the remaining commercial and industrial sectors.
The second consultation seeks views on the Government’s proposed framework to improve the implementation and enforcement of the Energy Performance Certificate (EPC) B target by 2030 for privately rented non-domestic buildings, with EPC C by 2027 set as an interim milestone.
Samantha Jones added: “The interim milestone should not be taken to mean that landlords must improve their properties to an EPC C before then improving the property to achieve an EPC B – the Government is clear that landlords should invest in the improvement of their building in a way that is most cost-effective and minimises disruption to themselves and their tenants.”
The current position is that from 1 April 2023 all non-domestic rental properties in scope of the regulations will need to be compliant with EPC E, or have a valid exemption. Beyond April 2023, the Government proposes that there will be new compliance windows where landlords are expected to comply, and where enforcement activity is required:
First Compliance Window: EPC C (2025-2027)
- 1 April 2025: Landlords of all non-domestic rented buildings in scope of Minimum Energy Efficient Standard (MEES) must present a valid EPC.
- 1 April 2027: All non-domestic rented buildings must have improved the building to an EPC greater than C, or register a valid exemption.
Second Compliance Window: EPC B (2028 – 2030)
- 1 April 2028: Landlords of all non-domestic rented buildings in scope of MEES must present a valid EPC.
- 1 April 2030: All non-domestic rented buildings must have improved the building to an EPC greater than B, or register a valid exemption.
At each enforcement date, landlords will need to demonstrate the building has reached the highest EPC band that a cost-effective package of measures can deliver. These new compliance windows highlight a notable change that landlords will be required to present a valid EPC two years before the enforcement date for each EPC target. This will involve submitting the current EPC to an online private rented sector (PRS) compliance and exemptions database, which will ‘start the clock’, creating a clear time period within which landlords will be expected to undertake improvements if they have not done so already. All properties will have to review their existing exemptions at the start of each compliance window and landlords would effectively have to ensure that any valid exemptions registered are still relevant in 2027 and in 2030.
In conclusion Samantha Jones said: “The Government also proposes a strengthening of enforcement with landlords having to provide a valid EPC to letting agents prior to a property being put on the market; removing the seven to twenty-one-day exemption and only being able to advertise and let properties compliant with the PRS regulations. There will also be a continual requirement for a building to always have an up-to-date EPC to ensure that lease renewals are captured within the scope of the PRS regulations.