With a new government looking to make its mark during a period of continued economic uncertainty, Solicitor Ashleigh Tainio-Miles explores some of the issues impacting the commercial property sector. These include the MEES Regulations, reforming Business Rates and aspects of The Levelling Up and Regeneration Act 2023 as it relates to Rental Auctions.
If you are a Landlord, Developer or Builder and have questions arising from any of the issues detailed in this article and they might impact upon you, our experienced Business Services and Commercial Property Team is on hand to support you through any difficulties you are facing. To discuss how we can help, please contact your local Kingsfords office in Ashford, Cranbrook or Hythe.
The Mees Regulations
As we enter another year, many commercial property landlords and stakeholders are becoming increasingly conscious of their obligations under the Regs. From 2022 most buildings require an Energy Performance Certificate (“EPC”), confirming its energy efficiency and areas required for improvement. The current obligation for non-domestic properties is an “E” EPC rating. However with the government’s primary focus on Net Zero it is rumoured that the grading will be tightened up over time requiring a fresh minimum standard of “C” rating by 1st April 2027 and a “B” by an advanced deadline of 2030.
Consequently, many properties are likely to become non-compliant far earlier than originally anticipated, preventing them from being rented out, unless exemptions are secured.
Landlords should be implementing plans now as to how they will invest in their properties and reach these targets, as it cannot be guaranteed that the Government will re-consider the realities facing landlords and relax the time-line.
Business Rates – All Change?
With the cost of living crisis not looking to disappear any time soon, the government recognised the direct impact this was having to the viability of high street businesses. They also acknowledged the threats posed to business by on-line giants and are promising “a new system that will level the playing field”. The government’s Autumn budget ’24 had the express aim of bringing growth to the economy, specifically by encouraging investment in business.
One of those recognised bars to investment is the business rate system, impacting on two million non-domestic properties and seen as being in need of modernisation. The Business Rates system has its origins in the 1601 Poor Laws, so that perhaps is not an unreasonable ambition!
The Government has asserted it is seeking to permanently lower business rates in the retail, leisure and hospitality sectors, with fresh formulas aiming to become effective in 2026 – 2027. Whether much pressed high streets can survive that long, whilst the government engages in a consultation exercise until Spring ’25, remains to be seen.
One idea is the shortening of the period between valuations of any property, (Antecedent Valuation Date – “AVD”) and the eventual date at which the new rating comes into force some two years later. Taking into account the existing 3-year gap between re-valuations themselves, it is effectively a 5-year period between AVDs. In theory, by having more frequent valuations, it may make the eventual rates charged more responsive to any economy fluctuations.
Another idea is to provide improved business rates relief for stakeholders improving their properties. As ever, watch this space. As the government seeks to replace – rather than reform the existing arrangements, the outcomes may be quite radical.
Levelling Up and Regeneration Act – Rental Auctions
Another hurdle for commercial property stakeholders to navigate, are the powers contained within the 2023 ”LURA”. This empowers Local Authorities to force landlords of vacant high street premises to grant leases to successful bidding parties. This area of the Act is further recognition of the real struggle facing many high streets to remain as vibrant, thriving business hubs. The aim is to reduce the percentage of vacant units plaguing many town centre high streets, enabling areas to be regenerated and help revitalise local economies and their communities.
The Act will only apply to those premises that have been vacant for a set period and are considered vital for the local community. However, there is not an exhaustive list of exactly which premises fall into this category, so the definition is somewhat broad.
Four Councils have been announced as guinea pigs for the scheme in Darlington, Bassetlaw and Mansfield, to “set an example for other authorities”, while Bournemouth, Christchurch and Poole (BCP) Council will join the initiative “in an advisory role as critical friends”, according to the Ministry of Housing, Communities and Local Government this week.
In practical terms, the Local Authorities will serve an initial Letting Notice followed by a Final Notice, each preventing Landlords from granting a tenancy or licence to occupy, without securing permission of the Council. (Such consent not to be unreasonably withheld).
The Landlord may file a Counter-Notice if it objects and ultimately Appeal to the County Court on receipt of any Final Notice.
The Council will seek to take control of intervening Rental Auction process, seeking to source interested parties willing to take a tenancy of the premises. They can negotiate terms and bind the landlord to any completed tenancy, rather than itself. Throughout that period, the Act compels landlords to collaborate constructively with Councils to identify potential suitable tenants within a fixed time frame.
The impact of these powers at such an early stage will remain to be seen, but it seems sensible for impacted Landlords to develop good working relationships with their councils. They should communicate regularly as to any re-letting or development plans, rather than run the risk of losing control over the re-letting of their vacant property.
If you are a Landlord or property developer and wish to discuss any of the issues raised in this article our Business Services and Commercial Property Team can help . Please contact your local Kingsfords office in Ashford, Cranbrook or Hythe. Alternatively, you can send an enquiry and a member of our team will get back to you promptly.