Gemma Smith and Saudah Basa, in Blandy & Blandy’s commercial property team, explain the pending deadline for landlords in relation to EPC and MEES regulations.
As of April 1, 2023, it will become unlawful for landlords to continue to let commercial property where the Energy Performance Certificate (EPC) rating is below an E.
This is in line with the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (MEES), under which it became unlawful for landlords to grant new or renewal leases of such properties as of April 1 this year.
An exemption may be available where all relevant energy efficiency improvements for a property have been made and the property still fails to reach the required standard, but this would need to be applied for and approved.
There is currently a loophole within the MEES regulations which means that they only trigger where a property has a valid EPC. As an EPC is generally considered not to be required on a renewal lease, many landlords have been able to renew leases to sitting tenants where the property would not achieve an E, but no EPC has been required and therefore MEES do not need to be complied with.
This loophole is set to close, and we recommend that landlords start taking steps to prepare for this now so that they are not caught out when further legislation does come into force. This new requirement is currently proposed to be put in place from April 1, 2025 as set out below.
Key proposals
The Government have proposed a phased implementation to raise the minimum EPC rating to a B by April 1, 2030 for all commercial rented property. It is thought to be likely that the minimum EPC rating will be raised to a C by April 1, 2027 as an interim target. New requirements for all commercial rented property to have a valid EPC is proposed to assist in monitoring compliance. The current suggested timetable is set out below:
By April 1, 2025 all landlords of non-domestic rented buildings must submit a valid EPC for every let property to a new online PRS compliance and exemptions database. Upon expiry of an EPC, the landlord must then carry out and upload an EPC so it will be a permanent requirement for commercial buildings to have an EPC in place.
By April 1, 2027, unless the existing EPC is band C or above, landlords must obtain another EPC to show that they have improved the building to band C or achieved the highest band that could be achieved with a cost-effective package of measures along with registering this exemption.
By April 1, 2030 unless the existing EPC is band B or above, landlords must obtain another EPC to show that they have improved the building to band B or achieved the highest band that could be achieved with a cost-effective package of measures along with registering this exemption.
What is considered to be cost effective?
Landlords are required to carry out works if they are cost effective under the seven-year payback test. This test is met if the cost of works will be less than the expected value of savings on energy bills. However, many landlords would argue that this saving would actually be made by the Tenant, but the improved energy efficiency would hopefully allow the property to command a higher rent.
Penalties
The penalty is set to increase for landlords who do not have a valid EPC from £5,000 to £30,000 from 2025. The proposals also allow tenants to request that non-compliant landlords carry out energy performance improvements and gives tenants’ rights for compensation for potentially having paid higher energy bills due to the non-compliant property.
Exemption from EPC
Only a few properties will be exempt from the requirement to obtain an EPC. A few examples of what could fall under an exemption are detached buildings where the floor space is less than 50 sq m, a temporary building going to be used for two years or less and listed buildings where energy efficiency improvements would alter the property unlawfully (though all other ‘permitted’ improvements must be made).
For further information or legal advice, please visit www.blandy.co.uk.
© Thames Tap (powered by ukpropertyforums.com).
Sign up to receive your free weekly Thames Tap journal here.
Easy EPC has been carrying out EPCs and other related property surveys across the UK since 2007. We carry out thousands of surveys a year working with everyone from homeowners and small independent businesses to local and national estate agents and larger companies including construction companies, high street banks, financial Institutions, major retail franchises, hotel chains, ‘fast food’ outlets, local authorities and health providers.
For our commercial EPCs we employ in-house assessors based in strategic locations all over the UK. We then quality-check all their work via our in-house tech team.
This set-up allows us to be competitively priced and guarantees that all our work is carried to a consistently high standard.
We carry out surveys wherever you need them in the UK, we always promise a quick turn around and we provide discounts on bulk bookings.
From one-off bookings to bulk and portfolio work, we make the process Easy!
Haptic EPC & Advisory offers rapid Energy Performance Certificate (EPC) assessments for commercial properties in London along with strategic procurement advice. We provide expert evaluations to enhance energy efficiency and compliance. Our skilled team offers detailed insights for property owners, focusing on sustainable solutions and regulatory adherence.
We are the only EPC company in London to have emerged from within the property industry itself and with over eleven years experience we are the go-to company for property professionals, landlords and agents. Full retrofit services available, non-lodged EPCs as well as BREEAM and WELL certification