Elaine Turtle: Big changes on property will affect SIPPs

From 1 April, just three months away, there are significant changes coming into effect that will impact the leases of commercial properties held within a SIPP or SSAS in the UK. These changes are due to the impact of the minimum energy efficiency standards (MEES) coming into force. The industry has been aware of these changes for quite some time, but many commercial property owners may still be unaware and unprepared for the impact of the MEES changes. Despite the Brexit vote, we aren’t avoiding the impact of the EU Directive and MEES is an example where this is a European directive. Appearing in Chapter Two of the Energy Act 2011, it is designed to improve the energy efficiency of buildings in the commercial rented sector in England and Wales. So from 1 April it becomes unlawful for any landlord of commercial premises to let property that falls below a certain level of energy efficiency.Energy efficiency is measured by the Energy Performance Certificate. Much like when you buy a new appliance such as a fridge, they are rated A to G, with A being the highest rating and the most efficient. After 1 April 2018, a property with an EPC rating below an E will not be able to be let without complying with scheduled improvement works to improve the rating. From 1 April 2018 this applies to any new leases granted, including the extension or renewal of an existing lease, and from 1 April 2023 it will apply to all existing leases. So if a SIPP or SSAS holds a property with an F or G rating and lets it, they will be in breach of the regulations. While the lease will still be valid and legally binding, the landlord will risk substantial financial penalties and being ‘named and shamed’ on a publicly accessible register. As diligent administrators, it is important to ensure that all SIPP and SSAS members are made aware of the potential issues and if an issue arises that it is dealt with to ensure no risk to their scheme. It is important to check the EPC rating of the building and consider the EPC recommendation report. If the rating is F or G the member should let the administrator know and keep them updated on any action taken. Works will need to be undertaken at the cost of the scheme to bring the building up to the required minimum standard.If the scheme is looking to purchase a new property, this needs to be thought through carefully if the rating is low as administrators may refuse to accept it due to the financial risks and impact on any future saleability, capital and rental value of the property. The MEES are a bit of a minefield but working with the client and adviser it can be navigated. Elaine Turtle, Director, DP Pensions

Elaine Turtle: Big changes on property will affect SIPPs

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