New EPC requirements for commercial property

August 1, 2023

New EPC requirements for commercial property

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By Oliver Morris

As a part of the global effort to become more energy efficient and reach the government’s aim of net zero emissions by 2050, from April 2023, every commercial property has had to have a minimum energy performance certificate (EPC) rating of E, before it can be let. This applies to existing leases, as well as new leases.

What is an EPC?

An EPC is an assessment of a property’s energy efficiency. Properties are ranked on a scale of ‘A’ to ‘G.’ A property with ‘A’ rating is the most energy efficient, with the least energy efficient properties given a rating of ‘G.’ An EPC contains estimated energy costs and provides suggestions to improve the energy efficiency of a property and the potential costs of doing so.

The rating of the property will also be viewable on the EPC register.

Exemptions and exceptions to the rules

Some exceptions can apply to the regulations where works to improve the energy performance would not be possible or economically feasible. Exemptions also include commercial properties that are subject to a lease of less than 6 months, or over 99 years. A property can be exempt if an EPC is unnecessary under the standard requirements for EPC’s.

If a landlord does find that a property is exempt, this exemption must be registered on the Private Rented Sector Exemptions Register.

What are the implications of a breach?

A lease will remain valid if a landlord lets or continues to let a property which breaches the new standards. However, the landlord could face a maximum fine of £150,000.

The landlord could also be placed on the Private Rented Sector Exemptions Register which details any breach publicly, which could result in reputational damage.

What should commercial landlords do now?

Commercial landlords should be proactive and make their properties compliant. To allow them to continue to let their commercial property:

1. landlords should check their property’s EPC rating, and ensure it is above ‘E.’
2. if an exemption applies, this should be registered on the Private Rented Sector Exemption Register.
3. if any property is below an ‘E’ rating and not exempt, the landlord must get the necessary work done as soon as possible.

Landlords should check existing leases to see if they have any access rights to undertake work under these leases and if they can recover any costs from the tenant.

Prior to creating a new lease, a landlord might want to have a detailed discussion with a tenant to make the tenant have some involvement with improving the EPC and about protections to prevent the tenant decreasing the EPC rating.

The future

In a world where many legislative changes are driven by environmental considerations, the expectations for landlords regarding their property’s energy performance will only get stricter. Landlords need to consider carrying out any works to the property sooner rather than later, to ensure they are fully compliant with current and emerging regulations.

If you want any advice regarding the above, contact our commercial property law team in confidence here or on 02920 829 100 for a free initial call to see how we can help you.