EPC Ratings – Commercial landlords, are yours up to scratch?
Commercial landlords and tenants, are you aware that for all leases, new and existing, The EPC ratings for your buildings must be at least E? Moreover, are you aware that this increases to C from April 2027 and B from April 2030? It is anticipated that this will affect 85% of commercial premises.
Background to the new regulations
Improving Energy Performance Certificate (EPC) ratings is a core element of the UK government’s drive to a ‘net-zero’ economy. The Minimum Energy Efficiency Standards (MEES) came into force in 2018. They aimed to improve the standard of commercial premises.
From 2018, all new leases for non-domestic rented properties required an EPC rating of at least E. This has been extended to existing leases from 1 April 2023. As a result, landlords cannot continue to let or sub-let commercial properties that have an EPC rating of below E.
Are your EPC ratings up to scratch?
With almost a fifth of commercial properties holding a rating of F or G and a midpoint of D, there is much work to do to bring properties up to scratch.
The UK has some of the oldest commercial stock. Improving energy efficiencies in these buildings is likely to be expensive. Landlords may also need to obtain third party consent to do the work. Tenants may be reluctant if the upgrades have a significant impact on the running of their business – especially if they must vacate the property while the work is being carried out. So, there is the potential loss of revenue while improvements take place and the time and cost of negotiations with existing tenants to consider.
Improving EPC ratings
Energy efficiency improvements could include:
- Replacing the boiler / heating system for a more energy efficient one
- Insulating the property
- Installing double glazed windows and doors
- Installing solar panels
Act now
A survey by Handelsbanken reported that 44% of commercial landlords surveyed admitted they were only moderately familiar with the government’s plan to increase minimum EPC standards to B by 2030. With the threat of fines of up to £150,000 for failing to comply, this legislation is not to be ignored. It is not just the prospect of large fines that are an issue, but also the risk of reputational damage.
Talk to a commercial property lawyer who can identify whether your property falls within these regulations. They can also prepare and review commercial property leases, and help negotiate on costs in relation to any required energy efficiency improvements.
Tarjinder Rayat
E: trayat@bird-lovibond.co.uk
T: 01895 256151