Update on minimum energy efficiency standards – government response published

The government has now issued its response to the consultation on minimum energy efficiency standards for the commercial rented sector.

The response confirms what had been previously mooted: 

1. The regulations will apply to all non-domestic property, except those which are already exempt from the requirements of the EPC regime;
2. The minimum energy efficiency rating will be ‘E’ – this mirrors the domestic property regime;
3. Landlords will not be required to make energy efficiency improvements: 

– which are not cost effective (i.e. cannot be repaid within 7 years or available under the Green Deal);
– where necessary consents cannot be obtained; or
– the measures will reduce a property’s value by 5% or more.

The regulations will come into effect on the 1 April 2018 and will apply to any new lease to new or existing tenants.  From 1 April 2023, there will be a blanket application of the regulations, so the trigger will not be a new lease. 

Enforcement will be by local authorities.  Although it is expected that Trading Standards will undertake this function, local authorities will be able to choose. There will be a six month window for compliance. 

Penalties for non-compliance will be twofold: 

• For providing false information on the register, a penalty of £5,000 is stated in the response.  
• For renting out a non-compliant property, there will be a sliding scale depending on the length of breach. The fines will be linked to the rateable value of the property.  For infringements of less than 3 months, the fine will be 10% of the rateable value, but with a minimum penalty of £5,000 and a maximum of £50,000.  For infringements of more than 3 months, the fine will be 20% of the rateable value, but with a minimum penalty of £10,000, and a maximum of £150,000.

The government will be drafting and issuing guidance shortly.

Read the full government response. 

For more information, please contact Lucie Hadwick, solicitor within the Real Estate team on 01392 687576 or lucie.hadwick@michelmores.com