Minimum Energy Efficiency Standards.

SIAM’s approach is designed to enable clients to prepare for compliance with the new regulations, to identify risks to the value and to the investment performance of affected buildings and to identify opportunities to achieve the best combination of environmental performance and financial returns. We also explore opportunities to mitigate any risks to value and, in particular, to identify ways in which EPC ratings can be improved at marginal additional cost through adapting regular asset management and property management activities.

Our holistic analysis can divided into a number of key stages, underpinned by the risk matrix shown in the chart on the final page of this proposal.

Verify or update the current EPC rating

It is by no means unusual to discover that errors have been made in the preparation of Energy Performance Certificates or that the use of default assumptions has produced an artificially low rating. We will undertake a new EPC assessment to verify that the current rating is accurate and, if so, whether the current rating is likely to be retained on re-certification in the event that no improvements are made before the date that the current certificate expires.

Recommended improvements

SIAM will identify ways in which the EPC rating can be improved and provide budget costs for combinations of works that would achieve better ratings. We will advise on the likely return on costs, in terms of energy efficiency savings and CO₂ emission reductions. We will also comment on any potential impact on rental value, capital value, marketability and voids.

We will highlight the best value combination of improvements that will deliver an improved EPC rating – to the minimum E rating and to a future-proofed D rating.

We will distinguish clearly between improvements that are entirely within the landlord’s control and those that can be achieved only with the co-operation of the tenants and between works that can be undertaken whilst the building remains in use and those that require vacant possession of all or part of the building.

Affordability and Exemptions

We will identify mandatory improvements that pass the seven year payback test by analysing the expected energy cost saving in comparison with the likely cost of funding the works as set out in the regulations.

We will forecast the revised EPC rating on completion of all qualifying works and, in the event that the EPC rating will not reach the minimum standard, we will explore the potential effect of a residual F or G rating with particular reference to the ratings of otherwise comparable properties which compete with the building in the local market.

Consents

We will identify which works require third party consents, including planning permissions and building regulations approvals and, crucially, from any superior landlords or sitting tenants. We can make applications for such consents, keeping records to show that all reasonable steps have been taken and, if consent is withheld or given subject to unreasonable conditions, will prepare the case for registering an exemption.

Timing

Where improvements are required to comply with the new regulations or are recommended to protect value, we will identify the optimum timing for the works, having regard to lease end dates, the likely replacement date for any obsolete fabric and services and any general improvements that may be under consideration as part of ordinary asset management activities.

We will also consider the impact on the overall EPC rating of tenants’ fixtures and fittings, such as local cooling systems, and consider the consequences of reinstatement at the end of current tenancies.

Funding and net costs

We will advise on the extent to which the cost of improvements could be recovered from the tenants, either as direct beneficiaries of energy cost savings or by way of service charge reductions and, where not covered by the terms of existing leases, will negotiate contributions.

We will also explore the extent to which energy cost savings will affect the amount of the overall service charge of the building and consider any negative consequences of seeking to recover the cost of the improvements by this means.

We will help to identify the amount of any shortfall to the landlord, either as a result of the wording of leases or, where the cost of improvements can be recovered in instalments over time, during anticipated void periods between lettings.

Energy savings initiatives

We will highlight any opportunities to reduce energy consumption by adapting the way that the building is managed by the landlords and used by the tenants that may significantly reduce costs but without necessarily influencing the EPC rating.