NewsEPCs in Commercial Property

For some years the UK has recognised the need for modern properties to become more sustainable.

Since 2008 property for sale and to let have been required to have an Energy Performance Certificate (EPC). This tells people how energy efficient the property is.

In 2018, the Minimum Energy Efficiency Standards (MEES) Regulations required commercial properties to have a minimum Energy Efficiency Rating of E. In April of 2023 this requirement was extended to existing leases.

New legislation now requires commercial landlords and property owners to have an EPC rating of C or above for their let properties by 2028, which is a big step up. This is because of the UK’s commitment to achieving its net-zero targets, and it has recognised the pivotal role that urban planning and architecture plays in emissions reduction.

If, as a Landlord, you fail to comply with these regulations by 2028, you could face a fine of up to £150,000.00, and may have your details published on the Private Rented Sector (PRS) Exemptions Register.

Fines are split into two categories, with:

1. Breaches subsisting for a period of less than 3 months being 10% of the rateable value of the Property, with a minimum fine of £5,000.00 and a maximum of £50,000.00.
2. Breaches subsisting for a period of more than 3 months being 20% of the rateable value of the Property, with a minimum fine of £10,000.00 and a maximum of £150,000.00

It is estimated that there are over 130,000 properties in the UK which currently have an EPC rating below C, and therefore will be at risk once the updated regulations come in.

EPC certificates are valid for 10 years and you can check if your Property has a valid EPC on:

https://www.gov.uk/find-energy-certificate

If your Property does not currently have a valid EPC you can obtain one from an accredited assessor who works in your local area. The cost of this assessment will vary depending on the assessor, but is usually calculated on the size of the Property.

However, if you, as a Landlord, believe your Property falls under one of the following categories then it may be exempt:

• If the Property is listed and alterations to meet the minimum EPC requirement would interfere with this listing.
• If the Property is to be used as a place of worship.
• If the building is only a temporary structure and it is only to be used for a period of less than 2 years.
• If it is a certain building with low energy usage such as some types of agricultural buildings such as barns, workshops, or other industrial properties.
• If the Property has Planning Permission which involves demolition of existing structures.
• If the Property has a floor space of less than 50m2

Even if the let Property is not in itself an exempt type of Property, there are a number of other exemptions which may apply:

• “High Cost” Exemption
  • If the cost of implementing the cheapest recommendation will exceed £3,500 VAT inclusive then the Landlord will have an exemption. This must be evidenced by 3 separate quotes for the works.
• “7 Year Payback” Exemption
  • If works to improve the efficiency of the Property will cost more than the amount that the Landlord would save in energy costs over a 7-year period from the date of the works.
• “Wall Insulation” Exemption
  • If one of the recommended improvements is cavity wall insulation, external wall insulation, or internal wall insulation and such installation may negatively affect the structure or fabric of the Property, then the Landlord may not be required to implement these improvements. This must be evidenced by an expert’s opinion, such as a chartered surveyor or engineer.
• “All improvements made” Exemption
  • If all works to improve the efficiency of the Property that can be made have been done, and the Property is still below a rating of E. In order to claim this exemption, a report would need to be prepared by a RICS surveyor confirming this fact.
• “Consent” Exemption
  • If works to improve the efficiency of the Property require the consent of a 3^rd party such as a local planning authority, a mortgagor, or the Tenant themselves and such consent has been refused.
• “Devaluation” Exemption
  • If works to improve the efficiency of the Property would cause the Property to be devalued by more than 5%. In order to claim this exemption, a report would need to be prepared by a RICS surveyor confirming this fact.
• “New Landlord” Exemption
  • If a person becomes a new Landlord, under limited circumstances they will have 6 months to comply with the efficiency regulations. These circumstances include where a Lease has been entered into under a contractual obligation, or a new Lease has been granted by a court under Part 2 of the Landlord and Tenant Act 1954.

In order for these exemptions to be valid, they must be registered on the PRS Exemptions Register. Once registered the exemption is valid for 5 years, except in the case of “New Landlord” exemptions, and do not automatically pass to a new Landlord if the Property is sold.

There are a number of ways that a Landlord can improve the efficiency of their building including:

• Upgrading electrical equipment and installations, such as LED lighting or low energy heaters.
• Insulating both internal and external walls, such as cladding or cavity wall insulation.
• Insulating windows, such as upgrading to double or triple glass panes.

As part of an EPC inspection, the surveyor will provide you with information regarding ways that the efficiency of the Property can be improved.

 

If you have any queries or would like to speak to one of our solicitors about the implementation of the new Minimum Energy Efficiency Standards to a property you may own or be a tenant of, please call us today:

Cullompton 01884 33818

Exeter 01392 285000