Property values could fall, landlords warned

Landlords could see their commercial property portfolios fall in value if they fail to comply with new energy efficiency legislation being introduced in April, chartered surveyors Johnson Fellows has warned today.

The Minimum Energy Efficiency Standards, which become law on April 1, will mean it is unlawful to let or renew leases and tenancy agreements that do not achieve a minimum Energy Performance Certificate (EPC) rating of E.

Ian Starbuck, partner in the property management team at Johnson Fellows, said not only could landlords face fines for non-compliance, they could also see a significant reduction in their properties’ values.

“The bottom line is that landlords will not be able to let any property that fails to meet at least an EPC rating of E. The bigger picture is that this will clearly impact on the investment value of a landlord’s portfolio immediately,” he said.
‘’Furthermore, it is currently unknown as to whether the minimum standards will be tightened in advance of the next deadlines. By of 1st April 2020 for residential properties and 1st April 2023 for commercial properties, compliance will no longer be restricted to new transactions, but all let property. We could well see assessors becoming more stringent, or a rating of D becoming the minimum.
“About 47% of properties in the UK are categorised as D or E and there is a real risk that these new regulations could result in many of them being downgraded further,” he added.
“Ignoring this new legislation is not an option and it makes no business sense, so we would urge anyone that still has not undertaken an audit to do so quickly and plan ahead.”
Ian also warned that in addition to the impact of portfolio values, landlords could face fines from a minimum of £5,000 if they fail to comply with a compliance notice, up to a maximum of £150,000 if they continue to let sub-standard properties.
“It is important that landlords act now by auditing their properties, identify any units that do not meet the minimum standards and plan ahead to make them compliant.’’

Johnson Fellows can assist with audits. It recommends the process below:

• Retrieve all existing EPC’s where available
• Where gaps exist, arrange for EPC’s to be completed.
• Highlight units that do not meet the required standards and provide recommendations to ensure compliance.
• Arrange quotations and manage the relevant works.