Regulations
It is common knowledge that in the sale of a property, the seller must make available, free of charge, to any prospective buyer a valid EPC.
The current legal requirement for commercial lettings is to have an EPC rating of at least an ‘E; if you intend to enter into a new or renewal lease.
However, with the need and desire to improve the energy efficiency of both residential and commercial private rented property, this requirement is to be extended to all existing leases. This could have a massive impact on your commercial lettings and you may fall foul of Part 3 of the Minimum Energy Efficiency Standards (MEES) Regulations.
These Regulations are designed to incentivise landlords to make energy efficiency improvements to certain let property which is currently sub-standard. This chance, could therefore affect your ability to let, or continue to let your property(s).
What does this mean?
Under Part 3 of the MEES Regulations, a landlord of sub-standard non-domestic PR property must not grant a new tenancy (on or after 1 April 2018) or continue to let the property (on or after 1 April 2023), unless either of the following apply:
- The landlord makes sufficient energy efficiency improvements to the property, so that it is no longer sub-standard.
- The landlord can claim a legitimate reason not to do so, and this has been validly registered on the Exemptions Register.
Please note that the MEES Regulations do not impose a positive obligation to carry out energy efficiency improvement works but expose you to enforcement action (namely sizeable fines up to 20% of your rateable value) if you do not have a legitimate reason for not making these improvements.
How to know what improvements to make?
Your current EPC will either contain, or have a separate report, which outlines the recommendations to improve the energy rating of the property.
This could include improvements such as:
- Internal or external wall insulation.
- Floor insulation.
- Loft insulation.
- Low energy lighting.
- Increase hot water cylinder insulation.
- Heating controls.
- Replace boiler with new condensing boiler.
Next Steps
Look at your properties and determine whether any have an EPC rating of “F” or “G” that will continue to be let after April 2023?
Do you have any “marginal” commercial properties that have a rating of “E” or “D”?
What (if any) improvements can be made to the energy efficiency of these properties?
The Future
With energy problems and prices at the forefront of everyone’s minds, tenants will be more aware of this change and we recommend that you act to make provisions now.
Not only this but as part of the renewed push to control the climate crisis, the DBEIS published a consultation in 2019 suggesting that all non-domestic properties should be required to achieve a minimum Energy Performance Certificate (EPC) rating of B by 1 April 2030, if cost-effective. The alternative target is a minimum EPC rating of C by the same date, if cost-effective.
If you have commercial properties, or you are a tenant wondering what your rights are in light of the new legislation please do contact our Commercial Property team on 01842 754151 and one of our experienced solicitors, who will be happy to have a discussion with you.