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Minimum Energy Efficiency Standards Already Hitting One Sector

New laws mean commercial property must now have an energy efficiency rating of at least E before a new lease or renewal lease can be granted but also a commercial property should not continue to be let if the rating is less than E.

There are some non-domestic properties which are exempt from the requirement to provide an Energy Performance Certificate evidencing a rating of A - E.

Properties are exempt if: 

  1. The property is a place of worship.
  2. The property is due to be demolished and have the evidence, such as the planning permission to do this. 
  3. The property is a detached building with less than 50 square metres.
  4. The property is a temporary building only going to be used for 2 years (evidence will also be required for this, such as planning permission). 
  5. The property is leasehold with a term of 99 years or more on the lease.
  6. The property is a listed or officially protected and the recommendations would unacceptably alter the property. However, to determine this, the landlord would have to get an EPC issued by a surveyor to evidence that they cannot carry out the works to improve the property to a minimum E rating. 
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If the above exclusions don’t apply – what next? 

It is important that commercial landlords act before the new rules have implications on their ability to let or continue to let their properties.

What should you be doing now:

- Check the EPC rating of each and every property you own and let and where an EPC certificate is in existence, check the expiry of that certificate. A certificate is valid for a period of 10 years unless the property has undergone significant changes. 

- Check if the property is classified as an exempt property for the purposes of the MEE’s Regulations (see above).

- If the rating is less than E, can you rely on one of the exemptions from carrying out improvements? These include:

- Any improvements made to the property would devalue the property;

- Landlord cannot obtain the relevant consent from the tenant to undertake the improvements; Where the tenant restricts or obstructs the landlord from accessing the property to make the improvements to comply with energy efficiency, the landlord can register this is an exemption with the PRS Register as long as they provide evidence of this.

Where one of the above exemptions do not apply, you should take steps to increase the EPC Rating. It is important that you carry out the energy improvements as soon as possible and therefore you may want to seek advice from a surveyor or building consultant.    

You may be concerned about the cost implications of carrying out such improvement works. Depending on the service charge provisions, you may be able to recover the costs of making the improvements to energy efficiency as part of the service charge provisions in the lease from the tenant(s) of the property. The tenant may also possibly find themselves liable, especially for leases terminating post April 2023 due to the statutory provisions in the lease.

Plan for the future! How will the MEE’s Regulations change over time?

The UK Government wants to raise the minimum EPC rating for commercial properties to C by April 2027. This means that all improvement works must be completed to improve the property by this date (unless exemptions apply). This applies to all relevant tenancies, not just new lettings.

By April 2030, the UK Government wants to raise the minimum EPC rating for commercial properties to B rating.

Being aware of the upcoming requirements is vital to ensure the future viability of commercial properties. 

* This article was supplied by business law specialist Leonard Curtis Legal *

Want to comment on this story? If so...if any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals on any basis, then the post may be deleted and the individual immediately banned from posting in future.

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    At least, while commercial EPCs are to be raised to B rating, they unlike us resi LLDs have access to finance it seems....
    I've seen on the reputable BDC publication:
    "To meet this demand and make building conversion affordable, specialist financiers are now offering financing packages which use future energy savings to finance building technology upgrades – covering condensing boilers, solar panels, heating ventilation and air-conditioning (HVAC), insulation, smart buildings controls, and any other technology required to upgrade a building to much higher energy-efficiency levels. These financing schemes allow buildings managers to achieve a strategic upgrade at low- or even zero-net-cost."

    Nothing like this for us.
    Only possibly some 'green' mortgages, but no way I'm going to start getting mortgages now.

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    I wonder if Mr Curtis has actually spoken to a commercial landlord? I'm a commercial landlord and far from 'hitting the sector' EPCs and MEES has bought tremendous benefits for landlords who actually think its a good idea to improve their product over the long term. Over the past 15 years some 1 million accurate commercial EPCs have been placed on the public national database. This comprehensive and reliable national database is the envy of other countries, so I read in a recent article in Property Week. Since 2008, landlords now have a reliable, statutory benchmark to demonstrate to our tenants, banks and the Government how efficient and low-carbon our built assets are. EPC Grade B by 2030 is absolutely achievable for just about every commercial rental unit in the the UK. EPC and MEES have driven the widespread roll-out of LED lighting and electric air-to-air source heat pumps for winter heating and summer cooling. We've just invested in a new insulated roofing system for an industrial unit we own. This has secured us an excellent long-term letting from a tenant who wanted a low-running cost, warm shed and who DEMANDED an EPC Grade B to independently prove that our unit is fit-for-purpose and future-proof. EPCs and MEES are a British Success Story. A tiny number of landlords, who refuse to plan for the future, still don't get this.

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    You are such an upright individual Martin that it’s almost impossible to believe. Stop your nonsense!

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    L expect he's in church as we speak before going off down the pub

     
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