One fifth of commercial and residential property may be excluded from the rental and lease market as soon as 2015 unless property owners move to comply with energy efficiency rules.

Legislation is already in place which states buildings with a rating of F or G on their Energy Performance Certificate (EPC) cannot be let out after 2018 without works having been carried out to raise the rating level.

However the property and construction consultancy McBains Cooper says it has reason to believe the measure may actually be introduced as early as 2015 as part of the UK’s commitment to reduce carbon emissions – something which ties in with the government’s track record of bringing forward some elements of new legislation.

“It might be considered an asset, but it may actually be a liability – and sooner than expected; in summary, if a commercial or residential property doesn’t comply, and its owner for whatever reason wants to switch it to being let out after the anticipated deadline, then he can’t. The owner can, however, renew existing leases, but that owner is potentially exposed should tenants decide to move out of an F- or G-rated building after the deadline date,” said Anthony Coumidis of McBains Cooper.

“We estimate that around one in five buildings fall into the F/G EPC category, including many listed or historical properties. Property owners therefore have only around 1,000 days to raise the efficiency ratings of F/G level buildings, or face them having to stand empty. In some cases, planning permission may be required, which, bearing in mind upgrade designs may need to be drawn up, can mean months of delays before work can actually start.”

In a bid to partly reduce the potential cost impact of the new EPC rules, the government’s “Green Deal” plan comes into operation in October 2012 - the basic concept being that residential and commercial property owners will be encouraged to upgrade the thermal values of the building fabric and to introduce higher efficiency, or renewable-based, HVAC (heating, ventilation, air-conditioning) technology.

Under the Green Deal, the capital cost of the approved works can be covered in the form of a loan which will be repaid over a set time period as an additional sum on the property’s energy bills. The Green Deal finance is attached to the property rather than the occupant, and if a building is sold or let, the liability for repayment of outstanding Green Deal finance will fall upon the new incoming owner or tenant.

But for some commercial properties in particular, the most appropriate and cost-effective means of upgrading efficiency ratings may not fall within the Green Deal criteria.
“What’s more,” said Mr Coumidis, “some owners and tenants may be uncomfortable with what is essentially a loan secured on their property - and may wish to fund improvement work direct.”