Commercial property has long been a favoured asset of SSAS and SIPPs, due to the tax efficiencies of holding property within a pension scheme.

Since October 2008, it has been necessary to obtain an Energy Performance Certificate (EPC) whenever a commercial property is sold. An EPC indicates the energy efficiency of a building, using grades from A to G (with A being the highest) together with a number. The greater the number, the less efficient the building. This is referred to as the ‘Energy Performance Asset Rating’ (EPAR). An EPC is valid for 10 years and fines of up to £5,000 can be levied if an EPC is not made available to any prospective purchaser or tenant.

With effect from 1 April 2018, it will be against the law to let a property (or renew a lease) with an EPAR within the two lowest bands, ‘F’ and ‘G’. This applies to properties in England and Wales*, with separate rules applying to properties in Scotland.

The rules will apply to existing leases from April 2023.

*There are some exemptions to this rule, namely for listed buildings, religious buildings, low energy agricultural buildings and those about to be demolished. The following website gives more detail about buildings that will be deemed exempt:- www.gov.uk/energy-performance-certificate-commercialproperty/exemptions

Firstly, if your property doesn’t already have one, obtain an EPC. This will indicate the current EPAR and include a ‘Recommendation Report’, confirming the action to be taken to improve the property’s energy efficiency. If you are not sure if your property has an EPC, you can check using the following website:- www.ndepcregister.com

Where necessary, you will then need to arrange remedial work. To lease the property, you will need to prove that your property has an EPAR of ‘E’ or higher and tenants may want to see an EPC which shows that.

Please remember that the cost of improving the property’s rating will fall to the pension scheme and not to the tenants. Please speak with us, or ask your property manager to speak to us, to factor into the pension scheme cash flow the likely remedial work costs.

Once the new rules are in force, if your property does not meet the new EPAR of ‘E’ or above, you cannot sell or lease that property. Existing leases cannot be renewed and the market value and marketability of the property is likely to be detrimentally affected.

Please start the process in time – take action yourself or instruct your property manager to do so.

Whilst reviewing your property, please check that the existing level of insurance is sufficient. Many property reinstatement values are much higher than their commercial value, and the property should always be insured at the higher value.

We now have access to a competitive block insurance policy for properties please let us know if you are interested in this.