Commercial property landlords face fines of up to £150,000 if they fail to comply with the government’s new energy efficiency regulations.
Landlords are no longer able to let energy-inefficient commercial space with an energy performance certificate (EPC) of F or G without making improvements. But there is a silver lining to the strengthened minimum energy efficiency standard (MEES) legislation, said Alun Oliver, managing director of E3 Consulting, with tax breaks for bringing energy-inefficient buildings up to scratch.
About 18% of commercial properties in England and Wales have an EPC rating of F or G and, since 1 April, landlords have been unable to let them on new leases without remedial action.
Mr Oliver said: ‘Although in a few cases the situation can be easily rectified, most F and G rated properties will require a degree of refurbishment and modernisation before a new lease can be granted.’
Landlords can buy themselves time by extending current leases but, from April 2023, all non-domestic buildings will have to comply with a rating of E or better to be legally let – irrespective of the lease term.
Mr Oliver said that the tax-saving opportunities include enhanced capital allowances (ECAs) providing 100% tax relief on some energy efficient and water conservation expenditure. ‘If refurbishment works are carefully designed around the energy and water technology lists as well as the relevant tax legislation, HMRC will in effect contribute towards the building’s upgrade while also improving the
Penalties for non-compliance with MEES regulations – introduced to help combat global warming – range from £5,000 to £150,000.