Landlords of both residential and commercial properties will have to deal with new regulations covering energy efficiency in the New Year.

From April, 2018 there will be new rules establishing a minimum standard of energy efficiency for new tenancies.

Hazlewoods, the Gloucestershire-based accountants and business advisers, say the regulations vary between the two categories of property but, broadly, those with an EPC rating of F or G will need to be raised to a minimum of an E rating, if landlords wish to grant new tenancies.

The regulations run to 96 pages for domestic and 71 pages for commercial, so this article certainly doesn't intend to cover the minutiae, but these are some of the main points.

Residential Landlords

The new regulations apply to 'relevant tenancies' which include an assured tenancy, a regulated tenancy and a domestic agricultural tenancy. If the property is not required to have an EPC then the regulations do not apply.

Fortunately, the regulations are not too costly for residential landlords because the improvements only need to be carried out, providing it is at no cost to them.

Commercial Landlords

The regulations are not so favourable to commercial landlords. There is no requirement that the improvements are at no cost to the landlord and, whilst they only apply to new or renewed tenancies entered into after 1 April 2018, no existing leases will be able to remain in existence after 1 April 2023, unless the EPC rating has been increased to at least an E.

There are two specific exclusions from the new regulations: where a commercial building is let under a tenancy granted for a term not exceeding six months, or if granted for a term of 99 years or more.

Improvements will only need to be carried out if the measure achieves an energy efficiency payback of seven years or less, the determining of which has to be calculated through the approved methodology and using relevant energy prices.

Penalties

The penalties for non-conformance can be significant; potentially up to £4,000 for residential landlords and up to £150,000 for commercial landlords, so they are certainly not something to ignore!

So if the Christmas party doesn't give landlords a headache, these new regulations may well do. With just a few months to go before their introduction, those with F or G rated properties need to start planning how they are going to improve their property to meet the minimum E rating.

Pictured: Ready to help - the property team at Hazlewoods: Megan Lewis-Bourke, Julian Millinchamp, Johanne Tisdale, Jerome Lane, Nick Haines (partner) and Katie Haslam.