Time for landlords to think about making energy improvements to their properties

Under the Energy Act 2011, it will be unlawful from April 2018 to let premises with energy efficiency ratings of F or G. Over 25 per cent of premises rated for energy efficiency over the last four years fall into these categories.

Not only older premises are affected, but premises constructed as recently as 2005 have been assessed as being “unmarketable” under the Act. 

The value of a landlord’s portfolio will be affected by premises with a low energy rating and the likely cost of carrying out works to improve energy efficiency. Landlords should take care to ensure that tenant works do not reduce the energy rating of their premises and that letting documents are robustly drawn to minimise risk. 

Tenants will need to pay more attention to the energy rating of premises and should ensure, when taking on premises with poor energy efficiency, that there is an obligation on the landlord to carry out remedial works (excluding tenant liability to contribute towards the cost of these works). 

There are real concerns that the approach of 2018 will bring difficulties in the trade of energy-inefficient premises, leading to longer voids and, conversely, a shortage of space. 

Landlords, tenants and investors should make careful decisions and ensure that well-informed advice puts them in the best position to avoid expensive pitfalls on the approach to 2018.

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