Property investors should act now to ensure that new Government legislation on the energy efficiency of buildings does not leave them with unlettable premises.
The Energy Act 2011, which has received Royal Assent, will make it unlawful to let buildings with F and G rated Energy Performance Certificates after April, 2018.
This means investors could face significant improvement costs to mitigate the potentially disastrous falls in the value of older buildings.
Investors should take immediate action to mitigate risk
Adam Ramshaw, Associate Director in our Capital Markets team said: “The degree of risk attached to F and G rated properties is high, and will get higher as the 2018 deadline approaches. Investors should act now to understand the reasons behind a property’s poor rating.”
He added: “Investors should act immediately to establish the cause of the poor ratings and establish the cost and affordability of putting things right to achieve a higher rating. This liability could lie with the landlord or tenant depending on the terms of the lease. As we get closer to 2018, Energy Performance Certificates will assume a greater significance. Investors should act now. While 2018 may seem a long way off, the impact on values will be felt much sooner.
Legislation will impact value of investment
“This legislation is likely to have a significant impact on the marketability and value of investment stock over the next five years and beyond. Landlords are already under a huge amount of pressure in the current climate. Additional expenditure will undoubtedly impact on the market, particularly for secondary stock where we are already seeing the effect of physical obsolescence on pricing and marketability.”
Government figures suggest that as much as 18% of buildings with an Energy Performance Certificate fall into the bottom two categories, spread across all asset classes.
“It’s also important that landlords of D and E rated buildings don’t get complacent. While F and G rated properties will suffer the first sanctions, falling values will affect other buildings too over time as regulations get more stringent. Investors and landlords should act now to secure the highest possible energy rating.”