Commercial and residential property rental has proved to be a lucrative business for many firms in the past but new rules coming next year could significantly impact on landlords’ profits.
It will become illegal to lease a property with a low-energy efficiency rating and this new regulation could be introduced in Scotland as early as April 2015.
In Aberdeen, the commercial property market has a considerable number of ageing premises which were built in the 1970s to accommodate the oil boom.
These properties will be directly affected by this new legislation.
It is a change that has been flying under the radar for many landlords, yet is something that could cost them thousands of pounds if they are not prepared.
Westminster set out its vision in the Energy Act 2011, highlighting various things that could be done to facilitate energy efficiency – such as changing light bulbs, refitting boilers or installing insulation.
The Act aims to tackle the current lack of investment in energy-saving measures in buildings across the UK, which is home to some of Europe’s oldest building stock.
The age of a building is quite often the biggest contributor to low-energy efficiency ratings.
Landlords who have a property with an energy efficiency rating of F or G and do not take action to improve this could find themselves foul of the law from the expected dates of April 2015 in Scotland or April 2018 in England.
Current regulations demand that owners of commercial buildings provide an energy performance certificate showing the energy rating of a building, on a scale from A to G, before any sale or rental agreement.
There is no legal duty on owners to improve poorly rated properties but that is about to change.
The immediate issues for landlords are the upfront costs they will have to spend to put energy efficiency measures in place, the length of time it will take to have them completed and the hassle of planning and executing the work.
Since 2012, a UK Government framework – the Green Deal – has been in place to offer energy efficiency improvements to residential and business properties at no upfront cost.
The price of the work is repaid by the consumer as part of their future energy bills.
Surprisingly, very few landlords have taken the government up on its offer.
It will cost time and money to make improvements, and failing to do so before the new legislation is introduced could have a detrimental impact on the value of your capital.
If you’re looking to buy property in the near future, be sure you know what the energy efficiency rating is. If it is below level E, consider the necessary changes without delay.
- Malcolm Ferguson is a commercial property partner at Aberdeen law firm Ledingham Chalmers
