I have heard about the new regulations for Energy Performance Certificates - what is changing and what are the implications for landlords and tenants?
Under the Minimum Energy Efficiency Standards (MEES), from 1st April 2018, it is against the law for a landlord to grand a new lease of commercial property with an EPC rating of F or G. From 1st April 2023, it will be against the law for a landlord to continue to let a commercial property with an F or G rating.
There are exemptions, but most landlords will need to comply or face a penalty of up to 20% of the rateable value of the property in question.
Whilst MEES imposes obligations on landlords to improve their portfolio’s efficiency rating, tenants should note that the regulations will prevent them from granting underleases of sub-standard property.
Any other upcoming legislative changes that might affect landlords?
From 25 May 2018, the EU’s General Data Protection Regulation (GDPR) will affect anyone who shares and processes personal data including landlords who collect such information as part of their general property management. Landlords must ensure that they have compliant policies in place in order to avoid financial penalties.
Why would a landlord agree to a break clause in a lease and how can it benefit both parties?
Break clauses are common in commercial leases and can be one-sided; mutual or personal and be on set agreed dates or rolling, exercisable at any time within a specific notice period. A landlord may require a break clause if they are considering redevelopment to ensure they can require the tenant to vacate at the end of the term. Tenants often request breaks to limit their financial commitment to the whole lease term and give them flexibility to terminate the lease. Landlords can consider including penalty payments if the tenant exercises the break or conversely, incentive by way of additional rent free periods the tenant does not exercise its break.
The terms of a lease usually include how the break clause must be exercised but it is important to be aware of any conditions attaching to it as well as provisions about how, and when and where to service notice.
The court adopts a strict interpretation of break conditions. Failure to comply with any conditions and failure to take legal advice may mean that break rights are lost.
If a lease provides that Service Charge costs must be ‘reasonably incurred’, what does this mean?
In a recent case the court had to determine the ‘reasonableness’ of the cost of the premiums of a landlord’s block insurance policy which was charged to the tenants. The court looked at the landlord’s reasoning behind choosing the policy and whether cheaper alternative policies presented by the tenants were genuinely comparable.
The same principles could apply to any costs payable by tenants where the terms of a lease say that they must be ‘reasonable’. Landlords may see a demand for transparency in their decision making and tenants asking for further justification for such charges.
If you have any questions regarding the above, please contact Joanne Wright on 01892 701164, email joanne.wright@ts-p.co.uk or Nicole Priestley on 01892 7011568, email nicole.priestley@ts-p.co.uk alternatively visit our website www.ts-p.co.uk/property
