What is an EPC?
An Energy Performance Certificate (EPC) rates a building on its energy efficiency (in terms of cost and emissions), benchmarks the building and makes recommendations on how energy efficiency can be improved. EPC requirements are not new, they have been in place since 2008, however, they are changing, and landlords need to be aware or they risk being fined.
What are the current requirements?
Non-exempt properties must have a valid EPC certificate to be let or sold, currently EPC certificates are valid for 10 years though they should be updated if significant structural changes are made. For commercial buildings there are also requirements over displaying your EPC.
Changes introduced in the “Minimum Energy Efficiency Standards” (MEES) 2018 mean that it is no longer legal to let a property, residential or commercial, that has an EPC rating of F or G. This has initially been restricted to new leases or lease renewals however this is set to change and from 1 April 2023 this will be extended to include existing leases.
What are the proposed changes?
Following a consultation in 2019 the Government confirmed it was planning to go further so that by 2030 all rented commercial properties achieve a minimum of a B EPC rating. This brings us to the current consultation, which is considering how to achieve this, how to improve the implementation, and strengthen enforcement of MEES.
- The introduction of a Band C milestone in 2027 meaning all commercial leased buildings must be improved to no less than EPC Band C by 1 April 2027, or register a valid exemption, and have an EPC reflecting this rating by 1 April 2028.
- All leased commercial buildings who still have not achieved Band B must make these improvements by 1 April 2030 or register a valid exemption.
- Enforcement will no longer be at the point of let , which currently raises issues for shell and core premises in that in some instances either landlords are required to make improvements which may then be ripped out when new tenants do fit out or proposed new tenants have to pay for improvements when they don’t yet have a contract in place. Instead there will be a 6-month exemption.
Does this apply to all commercial buildings?
As they say, there are exceptions to every rule and EPC requirements are no different. There are buildings that are exempt from the current requirements and proposed changes mentioned above. Exemptions relate to:
- Length of the lease – leases shorter than 6 months or longer than 99 years are exempt.
- The financial implication of making the required changes to improve the energy efficiency of the building – if the value of the building will be negatively impacted by more than 5% or it will take longer than 7 years to recoup the cost of the improvement measures, these buildings are exempt.
- Consent – tenants must consent to the improvement measures required to increase the building’s energy efficiency.
- Efforts made – if all improvement measures have already been made but the building can still not meet the target then it is exempt.
What do I need to do?
Whilst there is currently no new action that needs to be taken landlords need to be aware that these changes may be on their way and to keep an eye out for further updates following the consultation, expected in June of this year
For further information on how to improve the EPC rating of your commercial building please contact Mattew Peake or Robert Burke.
Partner – head of commercial and strategic asset managementT +44 (0) 20 7647 7067 Email Matthew