Commercial landlords beware: New EPC regulations in effect!
‘Go green’ or face hefty fines is the advice we are giving our commercial property clients following the introduction of new regulations for EPC certificates in April 2023.
April 2023 has brought new regulations requiring commercial landlords to have an Energy Performance Certificate (EPC) rating of ‘E’ or above. However, studies have shown that many commercial landlords are unaware of the new requirements and as such, we are advising all our clients with commercial premises to ‘go green’.
What is an EPC and how do I obtain one?
The EPC scheme was brought in by the Government to help summarise and establish the energy efficiency rating of a building. Each building is given a rating from A – G. If the property is given an EPC rating of ‘A’, it means that the property is very energy efficient and has lower running costs. At the other end of the scale, a property with an EPC rating of a ‘G’ means the property is not very energy efficient and requires improvement. The certificate also comes with a recommendation report, which details how the property can become more energy efficient.
All landlords must have an EPC if they rent or plan to sell their property. An EPC lasts for 10 years and is placed on an online EPC register. The cost of an EPC will depend on the size of the property.
To obtain an EPC for a commercial property, landlords must arrange for a commercial energy assessor to visit the property and carry out the assessment. To find a government recommended energy assessor, useful contact information for local assessors in your area can be found by visiting, Energy Performance Certificates for your business premises.
New EPC Regulations (from April 2023)
From the 1st April 2023, the Government introduced tougher EPC regulations for commercial landlords.
Until then, a landlord must have an EPC rating of E or less for any new tenant. However, the new regulations require ALL types of tenanted properties to have an EPC rating of E or less regardless of the type of tenancy itself. For landlords, this means that whether there is a new lease or a lease renewal, it is essential to conform to the minimum energy rating of an E.
Landlords who fail to meet the new criteria could face a fine of a minimum of £5,000. The fines don’t stop there, either! If a property is still not compliant three months after the new lease or lease renewal, the fine can be as high as 20% of the rateable value, with a minimum fine of £10,000 and a maximum fine of £150,000. So, landlords beware!
Exceptions to the new regulations
There are a few exemption categories but these need to be proven as ‘exceptional circumstances’ if landlords can demonstrate the following:
- Significant efforts have been made to improve the energy efficiency of a property without success or no improvements can be made because of the nature of the property – examples would include very old properties, historic buildings; or
- a valid exemption applies, some examples of which are shown below.
A valid exemption may include:
- Seven-year payback – if the cost of a recommended improvement would cost more than the savings on energy bills over the next 7 years, this is regarded as a valid exemption;
- Consent – if consent from a tenant or third party cannot be obtained to carry out the works;
- New landlord – where a new landlord takes over the property, a six-month exemption period may be granted;
- Wall installations – where the wall installation would have a negative impact on the structure of the property;
- Devaluation – if any of the improvements would devalue the property by 5% or more, or if the property would be damaged. Note that this would have to be evidenced by a valuation report;
- Special cases – listed buildings, temporary buildings, or buildings which are due to be demolished can also be exempt.
If a landlord can rely on any of the above exemptions (not an automatic right), it must be registered by the landlord on the PRS Exemptions Register before a tenancy is entered into.
What you should do
Commercial property landlords would be well advised to review each property to establish any requiring action. If a valid exemption may apply, this should be registered as soon as possible to avoid any possible fines.
Tenants of commercial properties should also ‘take action’! Commercial tenants should obtain an up-to-date EPC from the landlord, checking it to make sure the rating is compliant. If the rating is below an E, the landlord should be approached to discuss energy efficiency improvements.
We would welcome any enquiries from commercial landlords or tenants for professional advice on the new regulations. Please contact Lucy Benton, Alaisdhair MacPhie, Shona Maddison-Simpson or call us on 01539 723757.