Member Article

Commercial EPC legislation threatens historic North East properties

A Newcastle commercial property firm has warned that proposed climate-friendly legislation could be the death knell for many of the region’s historic buildings.

Without significant expenditure, an estimated 10,000 of the region’s historic commercial properties could be unlettable under the new rules, which come into force in 2018.

That’s the threat from commercial property specialists Johnson Tucker, who say heavy fines being planned against landlords who cannot sufficiently improve the EPC ratings of their historic properties could devastate redevelopment plans.

From April 2018 it will be against the law for a landlord to let a commercial property, or renew an existing lease, if the Energy Performance Certificate (EPC) rating is F or G. Potential fines could be anything from £5,000 to £150,000.

The rules will be applicable unless the landlord can prove he has carried out cost effective energy saving measures or is able to claim one of the limited exemptions set out in the rules. Listed buildings are only exempt for from the EPC requirements if the works required to bring it up to standard would unacceptably alter it.

Based on EPCs carried out to date, 18 percent of the stock in the region is within Bands F or G. Of the 18,424 commercial properties surveyed for an EPC up to the end of 2015 in Tyne & Wear, Northumberland and Co Durham, 3,281 remain within bands F and G.

And with only an estimated 25 percent of buildings surveyed to date this could increase to an estimated 10,000 properties which will become unlettable without significant expenditure in our region.

Partner at Johnson Tucker, David Johnson, says that while plans to improve EPC ratings should be broadly welcomed, special dispensation must be considered to widen the exemptions.

He said: “In the last few years, we’ve seen the rebirth of some stunning and historic areas of the North East, including areas in Newcastle like Ouseburn, the Stephenson Quarter and Grey Street.

’These areas have attracted business and investment because of their notable and historic features. Many business owners want to site their business in locations that have a story to tell.

“The cost of reaching acceptable EPC ratings could massively restrict a landlord’s ability to maintain them. With massive fines the only other option, there is now a very real threat that they could turn their back on them altogether.”

Johnson says the cost of improving an old building’s EPC rating, for example, from G to E could involve vast investment and not actually have much of an impact on its environmental credentials. He says the accuracy of EPC assessments, having witnessed wildly differing assessment ratings for the same properties, has question marks over them too.

He explained: “The surveyors carrying out the EPC assessments generally do not have any experience in advising on the maintenance and refurbishment of older buildings; the recommendations reports are of very limited practical value and have no regard to commercial reality.

“Heavily penalising the owners of older and historic buildings will not solve the problem of helping the environment. I think we have to accept they’re a very special case and accept their unique and historic features are what make them desirable.

“Unless there is a change in the rules it will be uneconomic for owners of older buildings to carry out the works required to bring them into use for the letting market – the result will be that these older buildings will remain empty and will decay.

“Few people would like to see vintage cars banned from the road because they do not meet current emission standards – like older buildings they are part of our heritage.

“At Johnson Tucker, we’re finding it very hard to advise owners of historic properties on what to do and most seem to be putting their heads in the sand. There are difficult questions for rent review and valuation surveyors – because the potential impact of these changes has not really been reflected in the market to date.”

Instead of the “stick” approach the Government plans, Johnson Tucker is calling for new property developers to be further incentivised to make further eco-friendly introductions into their new builds in order to tackle the wider environmental issues and make them more attractive to potential tenants.

This was posted in Bdaily's Members' News section by Johnson Tucker LLP .