EPC Deadlines: A Problem For Today, Not Tomorrow
Against a backdrop of rising prices and interest rates, city landlords are increasingly bearing witness to tenants leaving long-term homes as businesses look to mitigate risk amid an uncertain economic outlook. Rising costs of debt and stubborn inflation have turned the screws on bottom lines and subsequently, EPC minimum energy efficiency standards have fallen towards the bottom of priority lists for landlords across the UK.
While the regulations may feel too far ahead to warrant thinking about for some, this is far from the truth. As it stands, reports have revealed that fewer than 1 in 10 UK offices are on track to meet the 2030 minimum EPC standard of ‘B’, throwing the prospect of reaching the 2028 target of a ‘C’ rating also in doubt. Similarly, Knight Frank estimates that 60% of all warehousing space in the UK risks failing to meet 2030 requirements.
It is crucial that landlords get ahead of the problem before it is too late: fines for not meeting this minimum standard are expected to skyrocket, costing anywhere from £5,000 to £30,000 with the potential to increase further as we near the 2030 deadline. The early bird really does get the worm in this instance – any investment of time and money from landlords now into improving current standards will ultimately be an investment into the future, and an opportunity to sidestep any potential financial hardship down the road.
The current state of play, however, lacks clarity; with the waters only muddied further by the government’s indecision in setting firm EPC deadlines. Calls have been made on the government by bodies including the British Property Federation to clarify EPC targets for commercial buildings, and indeed, any further support at all from the government would not be remiss; particularly in these trying times where budgets have been stretched to capacity. Not enough has been shared by way of guidance on the upcoming deadlines, creating an environment where many landlords are not unwilling, but rather un-knowing; a survey from the Mortgage Advice Bureau earlier this year revealed that 47% of landlords incorrectly believed that the requirement of a ‘C’ rating was mere guidance rather than law.
We need to see more of a carrot; not just the stick. Some form of incentive, such as in the form of a financial package to support improvements made by cash-strapped owners of buildings, will likely spur action across the industry. In fact, calls of this nature have already been made by industry bodies such as the National Residential Landlords Association, who have demanded a “clear, workable financial package”. Only by providing landlords with the motivation needed to make these improvements can we achieve what we set out to ahead of incoming deadlines. In the current economic climate, there are many landlords (owners of retail, for example) that can barely stay in the black at present, so how can they plan for the future? Financial assistance from the government is needed as a matter of urgency.
Ultimately, landlords need more support and clarity to ensure the majority are meeting the signposts as they have been set. The government needs to be doing more; providing further clarity on how these deadlines can be met as well as setting clear and reasonable deadlines from the outset. Yet, the unfortunate reality is that landlords who continue to sit on this problem will most likely be met with a £30,000 fine further down the tracks.
